Technical View: Nifty forms Opening Marubozu candlestick pattern; 10,900 likely in May series

The Nifty50 witnessed a breakout in morning trade which pushed the index above 10640 and then 10700 levels in trade on Friday. However, the index failed to close above this level making a bullish pattern similar to ‘Opening Marubozu’ candle on the daily charts.

An Opening Marubozu candle represents extreme bullish behavior and is formed with a long white body that has an upper shadow but no lower shadow. Although in Friday’s price action Nifty50 has a small or insignificant lower shadow.

The index opened at 10,651 and slipped to an intraday low of 10,647.55. It hit an intraday high of 10,719.80 but then pared gains and closed at 10,692.30.

After a strong gap up opening, Nifty decisively closed above its critical resistance point placed around 10630 levels which has now opened fresh targets towards 10900 for May series, suggest experts. Traders can keep a stop below 10600 levels for all long positions.

“It was heartening to see Nifty50 starting the new series on firm footing with a gap up opening above the small 4-day old congestion zone between 10638 – 514 levels. In this process, it also registered an Opening Marubozu candlestick formation, in which low and opening price for the day remains same, suggesting buying pressure on the indices from the word go,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“As indices decisively conquered the critical resistance point placed around 10630 levels, traders can expect higher targets placed around 10900 levels. In between minor hiccup can be encountered by bulls in the gap zone of 10702 – 10736 registered on 5th of February,” he said.

Mohammad further added that once 10,600 hurdles is cleared bulls shall initially march towards logical targets of 10900 levels. Traders are advised to make use of dips if any towards 10650 to create fresh longs with a stop below 10600 levels on closing basis.

India VIX fell down by 0.19% at 12. Lower volatility suggests that bulls are holding the grip on the market. Volatility has been falling for last four consecutive weeks.

On the options front, maximum Put OI is at 10500 followed by 10400 strikes while maximum Call OI is at 11000 followed by 10800 strikes.

Meaningful Put writing was seen at 10600 and 10500 strikes which is shifting its support to higher zones while Call writing is seen at 11000 and 10900 strikes.

“Options data suggests an immediate trading range between 10600 to 10800 levels. Nifty gave a consolidation breakout from its trading range of 10500 to 10638 zones made in last eight trading sessions,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It formed a Bullish Candle on the daily chart and continued its formation of higher highs – higher lows on the weekly scale for the fifth week. It completed its 61.80% retracement at 10707 from its down leg of 11171 to 9951 levels,” he said.

Taparia further added that it has to continue to hold above 10638 zones to extend its move towards 10737 then 10800 zones while on the decline supports are seen at 10580 then 10550 levels.