Technical View: Nifty forms solid bull candle; next target seen near 10,350

Bears which remained in control of D-Street in 4 out of 6 trading days in the month of December seem to be on a back foot now as bulls have firmly taken control.

The index formed a solid bull candle for the second consecutive day in a row on Friday as uncertainty over the state election results abate.

The index is now trading above its crucial short-term moving averages and is on track to hit 10,350 levels as long as it trades above 10,121. Investors are advised to trade long and book profits above 10,300 levels.

The Nifty which opened at 10,198 rose to an intraday high of 10,270. It slipped marginally to hit an intraday low of 10,195 before closing 98 points higher at 10,265.65.

The Nifty index continued its up move and rallied by around 100 points and negated its formation of lower highs – lower lows for the second day in a row which is a bullish sign.

“Bulls continued their show of strength as Nifty50 registered a solid bull candle with a gap up opening and signed off the week with a Hammer formation in style in a week which has otherwise threatened to pull down the indices into some sort of downtrend,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“With this kind of strength the next target appears to be in the zone of 10,332 – 10,345 which is the gap down area registered on November 30 and the index is expected to witness some sort of selling pressure in this zone,” he said.

Mohammad advises traders to book profits in the said zone on signs of weakness. The confirmation for the resumption of up move shall occur if Nifty50 manages to get past 10,410 levels by December 14. In such a scenario one can expect a retest of life time highs placed at 10,490 levels, he said.

India VIX fell down by 4.19 percent at 13.67. The decline in VIX by 10 percent in the last two sessions has given relief to bulls and market recovered smartly from lower zones.

On the options front, maximum Put open interest is at 10,000 followed by 9,800 strikes while maximum Call OI was seen at 10,500 followed by 10,400 strikes.

“We have seen Call unwinding in most of the strikes while fresh Put writing is seen at 10,200 strikes. Fresh Put writing at 10,200 could act as an immediate support to hold the recent bounce back move,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty formed a Bullish Candle on the Daily chart. It managed to surpass its 50 DEMA and covered its half of the losses made in a previous week. It has to continue to hold above 10,178 to extend its move towards 10,350-10,400 zones while on the downside support exists at 10,150 then 10,094 mark,” he said.