Technical View: Nifty forms bullish candle; keep a stop loss below 10,628 levels

Rallying for the third consecutive day in a row on Monday, Nifty50 managed to reclaim 10,650 levels and formed a bullish candle on the daily candlestick charts.

The index is now trading above most of its short term and medium term moving averages which is a bullish sign. A large part of the rally was led by short coverings, suggest experts.

The Nifty50 struggled around 10,690-10,700 levels and despite an intraday breakout above 10,700, bulls failed to sustain above 10,690 on a closing basis. But, the up move could well extend towards 10,777-10,800 and a stop loss below 10,628 can be kept for all the long positions, suggest experts.

“Bulls continued their northward journey as they opened the show with a gap up on the first day of the week before signing off the session with a decent bullish candle. However, it appears that close to 10,700 levels they are witnessing some sort of selling pressure,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Hence, in next session, it looks inevitable for bulls to consistently trade above 10,700 levels to retain the same bullish undertone. In that scenario we can expect this up move getting stretched up to 10777 kind of levels,” he said.

Mohammad further added that a sustainable close above 10,800 levels which shall clear the path to take off the critical hurdle of 10929 levels. Traders can trail their stop below 10,628 on a closing basis.

India VIX moved up by 3.28 percent at 13.05 levels. On the options front, maximum Put OI is intact at 10,500 followed by 10,600 strikes while maximum Call OI is seen at 10,800 followed by 11,000 strikes.

Significant Put writing is seen at 10,700, 10,650 and 10,600 strikes which suggest an extension of up move while Call unwinding is seen at immediate strike prices which gives room for further upside.

“Option data suggests a shift in a trading range between 10,600 to 10,800 zones. The Nifty index opened gap up and extended its gains towards 10710 levels. It formed a Bullish Candle on the daily scale and has been making higher highs - higher lows for last three trading sessions,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Now, till it holds above 10,620 zones, it could extend its gains towards 10,735 then maximum to 10,800 zones while on the downside supports are seen at 10,620 then 10,550 levels,” he said.