Technical View: Nifty forms small bullish candle; trade long with a stop below 9700

The Nifty50 which started on a muted note managed to reclaim its crucial resistance level of 9,800 on Wednesday and made a small bullish candle and negated negative shooting star pattern formed in the previous trading session.

A small bullish candle is formed when the index closes above its opening level but trades in a defined range. The Nifty which opened at 9807.30 slipped to a low of 9,787.70 but rose to an intraday high of 9,824.95 before closing the day 30 points higher at 9,816.10.

The index moved in the previous trading range of the previous session, but the Bulls managed to save the day for Nifty50. Traders can retain their long positions with a stop loss below 9,700.

Despite moving in a narrow range of 37 points, Wednesday’s price action in Nifty50 should certainly give a sigh of relief to the bulls as there was no follow through to the weakness exhibited around 9800 levels.

“Wednesday’s price action should be read as a positive sign and it also appears that the rally may get broad based as Bank Nifty which was lagging behind till last trading session is showing some promising signs of recovery,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“If that happens then with the contribution from this sector Nifty50 can easily head towards its next much-awaited destination placed around 10,000 levels,” he said.

We recommend traders to remain confident enough with long positions and ride this rally with a stop below 9700 levels,” added Mohammad.

On the options front, maximum Put OI was seen at strike prices 9,600 followed by 9,500 while maximum Call OI is at 10000 and 9800 strikes.

Fresh Put writing at 9700 and 9800 strikes which are supporting its up move while the shift in maximum Call OI to 10000 strikes is giving a scope to head towards five digit psychological 10000 mark.

“Option band suggests a shift in the trading band to higher zones and 10,000 level on Nifty looks plausible. On the technical front, Nifty traded inside the trading range of the last session but it nullified the effect of previous day’s Shooting Star candle and formed a small Bullish candle on the Daily chart,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Now, it has to continue to hold above 9,800 zone to extend its up move towards 9,900 zones while on the downside supports are seen at 9,750 and 9,709 mark,” he said.