Technical View: Nifty forms bullish candle; trade long with stop below 9,838

The Nifty50 came in kissing distance from Mount 10K but profit booking dragged the index towards 9650 levels in the last 1 hour of the trading session. The index formed a bullish candle on the daily candlestick charts negating ‘Hanging Man’ kind of pattern witnessed in the previous trading session.

A bullish candle signifies that the market witnessed sustained buying interest from the bulls throughout the trading session and the index closed well above its opening level.

The Nifty50 surpassed its previous record high of 9,928 with ease in morning trade and hit a fresh record high of 9,982.05. However, some bit of profit booking at higher levels restricted 10,000 level on the Nifty50.

However, August Futures have already hit this magical number and it should happen in the spot market in this week, suggest experts. If the index closes comfortably over 10K, it will open window for a fresh target of 10,300 and 10,400, suggest experts. Traders can comfortably trade with long positions with a stop below 9,838 levels.

The Nifty50 opened at 9,936.80 and rose to a record high of 9,982.05. It slipped to a low of 9,919.60 before closing the day at 9,966.40, up 51.15 points on Monday.

“The Nifty index managed to surpass previous high of 9,928 and made a new lifetime high of 9,982. It gave a consolidation breakout of last seven trading sessions and closed with the gains of around 50 points,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It made a Bullish Candle at new high territory and is just shy to test its historical 10,000 mark. Now it has to continue to hold above 9,928 to witness an up move towards 10,000 and then at 10,100 levels while on the downside supports are seen at 9,880 and then towards 9,850,” he said.

Taparia is of the view rising Put Call ratio, consolidation breakout at new highs and Put writing at in the money strike suggests that now the market is all set to cheer the 10,000 mark.

On the options front, maximum Put OI was seen at strike prices 9,800 and 9,900 while maximum Call OI was seen at strike prices 10,000 followed by 10,100.

Fresh Put writing at 9900, 9950 and 10,000 strikes which suggest the extension of this up move, while fresh Call writing at 10050 and 10100 strikes is shifting its hurdle to higher zones.

“As the momentum picked up once again with new lifetime highs, it looks prudent to flow with the current rather than moving against the momentum till some signs of reversal on lower time frame charts are visible but certainly with caution,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“If Nifty50 manages to stay above 10,000 mark on closing basis then based on long term charts new targets in the zone of 10,300 – 400 can be projected. Hence we advise traders to cautiously remain stock specific on the long side with a stop below 9838 levels,” he said.