Technical View: Nifty forms bullish candle on charts; 10K now in sight

February 11, 2008: The Sensex dropped 4.57 percent within a day, as the Index shed 796.43 points. The benchmark Index fell 833 points, or 4.78 percent and closed at 16,630 on growing global worries over slowing economic expansion. The reasons cited for this fall were weak global markets and disappointing corporate earnings.

The bulls managed to regain control of D-Street as Nifty closed above its crucial psychological level of 9950 levels and above its key short-term moving average on Friday. It made a strong bullish candle on the daily candlestick charts.

The Nifty recouped most of the losses made in the previous session and closed above its crucial short-term moving averages such as 50-days exponential moving average (DEMA), 5-DEMA, 10-DEMA, 20-DEMA, and 13-DEMA.

The index which opened at 9908.15 slipped to an intraday low of 9906.60. But, bulls took over and pushed the index beyond its crucial psychological resistance level of 9,950. The Nifty closed 91 points higher or 0.9 percent at 9979.70.

Investors are advised to continue with their long positions with a strict stop loss placed below 9900 levels. Given the fact we are trading near key resistance levels, some amount of profit booking cannot be ruled out.

“It appears that Nifty50 registered a fresh breakout as bulls unleashed their energy levels with a strong bull candle of around 1 percent gain. Friday’s price behavior tilted the tide in favour of bulls and they can be expected to cruise their journey towards next logical target of 10080 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Traders are advised to continue their longs with a stop below 9900 levels as the real challenge for bulls lies ahead around 10,080 conquering which shall rise renewed hopes for new life time highs once again,” he said.

India VIX fell down by 5 percent at 11.11. Volatility has been cooling down from last six sessions which is a welcome sign for the bulls.

On the options front, maximum Put OI was seen at strike prices 9800 followed by 9900 strikes while maximum Call OI is intact at 10,000 followed by 10,100 strikes.

Fresh Put writing was seen at strike prices 9900 and 10,000 while fresh Call writing was seen at all the strikes from 10,100, and 10,400. Call unwinding was seen at strike prices 10,000, 9900, and 9800.