Technical View: Nifty forms bullish candle; 10,000 looks in sight now

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The Nifty50 dispelling fears of weak GDP numbers rose above its crucial resistance level of 9,948 on Friday and is on track to reclaim Mount 10K in September. The index made a bullish candle on the daily candlestick charts.

A bullish candle formed on the daily chart signifies that the market witnessed sustained buying interest from the bulls for the most part of the trading day.

The Nifty50 opened at 9,937 and rose to an intraday high of 9,983 before closing the day 56 points higher from its previous close at 9,974. It slipped marginally to 9,909 which created a small lower shadow.

The index is now trading above its crucial short term moving averages such as 5-days exponential moving average (DEMA), 10-DEMA, 13-DEMA, 20-DEMA, and 50-DEMA.

Formation of a bullish candle has negated the possibility of a large correction in the coming trading sessions. The index is on track to reclaim 10,000 levels and possibly record highs but investors are advised to decrease their exposure to high beta stocks given the fact we are approaching key resistance levels.

“It was heartening to see Nifty50 clearing the resistance of 9948 levels which negated the threat of big price correction going forward. With this breakout kind of situation on lower time frame charts Nifty50 should ideally head towards its next logical target of 10046 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“However, the current rally from the lows of 9,685 is still part of a corrective structure and hence in the best scenario, Nifty50 should get stuck up in a range of 10,000 – 9,700 levels for quite some time,” he said.

Mohammad advises traders not to go for aggressively long positions but focus on stock specific activity besides giving preference to lighten up their positions especially in high beta stocks as we head towards 10,000 plus kind of levels.

On weekly basis, Nifty closed with the gains of 1.19 percent and has also given a consolidation breakout from its three week’s range of 9750 to 9944. However, a long black candle made in the second week of the August month is still having some concern near to 10,080 zones, suggest experts.

On the options front, for the September series maximum Put OI was seen at 9,700 followed by 9,800 strikes while maximum Call OI was seen at 10,000 followed by 10,100 strikes.

"Option data suggests that supports are shifting higher while life time high of 10080-10138 is still going to be a stiff resistance zone to commence any upside movement in the market," Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Technically, Nifty has decisively surpassed its immediate hurdle of 9928-9950 zones and given the highest daily close in last sixteen trading sessions,” he said.

Taparia further added that the index has been making higher lows from last three trading sessions and needs to hold above 9928 zones to extend its up move towards 10,020 and 10,050 while on the downside supports are shifting higher to 9,900 and and then towards 9,850 levels.