Kshitij Anand Moneycontrol News
The Nifty50 recouped morning losses and climbed 10,500-10,550 levels to close just a shade below its crucial resistance levels of 10,600 levels on Tuesday. Robust IIP data for the month of September, cool off in inflation numbers as well as fall in crude oil prices added to the tailwind.
The strong rally seen in the index took shape of a Piercing pattern which signals a temporary halt to the downtrend. The pattern is formed by two consecutive candlesticks.
The first candlestick is a strong red candle or a bearish candle which is followed by a green or a bullish candle. The bullish candle should cover at least half of the previous day’s red or bearish candle. It is a potential signal for a reversal.
The S&P BSE Sensex recouped previous session losses and reclaimed 35000 while the Nifty50 rallied over 100 points and reclaimed 10,550 levels on closing basis which is a positive sign.
O the upside, 10600 is acting as a crucial resistance level for the index. This is the fourth straight session in which we saw Nifty50 facing selling pressure, the moment it comes near 10600-10650 levels.
Most experts feel that for bulls to take control, Nifty should close above 10650-10700 levels, else the selling pressure could drag the index towards crucial support placed at 10440-10333 levels.
The index which opened at 10,451 rose to an intraday high of 10,596. It slipped in the morning session to touch an intraday low of 10,440 which is also its crucial support. The Nifty finally closed 100 points higher at 10,582.
“Post Tuesday’s price action, it appears to be a clear cut advantage to the bulls, as Nifty50 registered a Piercing pattern (bullish reversal formation). It bounced from the critical support of 10440 on short-term charts,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“However, as the indices are still in congestion zone of 10440 – 10645 a breakout above this range shall only confirm the extension of this pullback rally. On such a breakout initial challenge for bulls remains around 10710 levels,” he said.
Mohammad further added that once the index manages a close above 10710 then the critical hurdle is placed in the zone of 10754 – 10840 levels which are a bearish gap registered on 4th of October. Interestingly, 200-day moving average (10759) is also placed inside this gap area.
On the other hand, if Nifty50 violates 10440 then it shall resume the downtrend. India VIX fell down by 3.48 percent at 18.70 levels. VIX has to cool down below 16 zones to get the next leg of smooth upside rally in the market.
On the options front, maximum Put OI is placed at 10000 followed by 10200 strikes while maximum Call OI is seen at 11000 followed by 10800 strikes.
Put writing is seen at 10200 and 10400 strikes while Call unwinding is seen at all immediate strikes. Option band signifies an immediate trading range in between 10450 to 10700 zones.
“The Nifty index opened negative but managed to hold near to 10450 zones and headed towards 10600 zones,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“It recovered most of its losses made on last trading session and formed a Piercing Line pattern on a daily scale which indicates that bulls are not loosening their grip,” he said.
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