Technical View: Nifty forms ‘small bull candle’; upside remains capped

The Nifty pared some gains after hitting a record high of 9,687.20 on Monday, but made a small bull candle on the daily candlestick charts as closing level was higher than opening level.

A 'small bullish' candle is formed when the index trades higher throughout the sessions but in a defined range. The length of the candle signifies the range for the day.

A short bull candle formed after a "doji star" signifies that the market still hasn’t got a clear direction and there is a good possibility that market could witness some profit booking in the next few sessions.

The Nifty, which opened at 9,656.30 rose to a record high of 9,687.20 which made a small upper shadow. It slipped to 9,640.70 to touch its intraday low before closing the day at 9,675.10, up 21.60 points from its previous close of 9,653.50.

Investors, who are long should remain long while for those who are planning to initiate fresh long positions should await a breakout above 9,700 before coming fresh capital in markets, suggest experts. A close below 9,633 could put bears in charge of D-Street, they say.

“The Nifty continued its listless activity into 4th trading session as markets once again witnessed a narrow range of 47 points by registering a small bull candle,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“However, at this point in time despite positive closes witnessed in the last two sessions technical picture on lower time frame charts is deteriorating fast and our twin momentum oscillators which have higher accuracy in catching turning points generated a sell signal in Monday’s trading session,” he said.

Mohammad further added that the market is likely to kick in a corrective and consolidation process in the next few trading sessions. Traders are advised to book profits and to watch the level of 9633 because a close below which shall not only confirm short term weakness but also usher in a corrective downswing.

On the options front, maximum Put OI was seen at strike price 9,500 followed by 9,400 while maximum Call OI was seen at strike prices 9,700 followed by 9,800.

Fresh Put writing was seen at strike prices 9600, 9700 and 9500 strikes which are shifting its support to higher zone while fresh Call writing is seen at 9800 which may provide as an immediate strong barrier for the market.

India VIX moved up by 1.90 percent at 11.01 and overall lower volatility is supporting the bullish undertone of the market, suggest experts. Lower VIX indicates "Risk Off" situation.

“India VIX is trading at a level which does not indicate volatility as off now but any move beyond 12.50-13 could lead to an acceleration in volatility. Thus it's imperative for a trader to hedge the position adequately in that situation,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It formed a small bullish candle on the daily chart and holding its positive price pattern. Now it has to hold above 9,635 to extend its up move towards 9,750 zone while on the downside supports are seen at 9,580 and 9,550,” he said.