Technical View: Nifty forms strong bull candle; trade long with a stop below 9,944

The Nifty50 which opened with a mild gap on the upside on Monday witnessed marginal profit taking in the opening trade but bounced back from its crucial 5-days exponential moving average (DEMA) placed at 10,019 and made a strong bullish candle on charts.

Banking stocks came to the rescue of Nifty50 which was languishing in a narrow trading range after SBI slashed its rates on saving bank account which led to the strong rally in Nifty Bank which touched fresh record highs.

The index closed well above its opening level making a bullish candle on the daily charts which suggest that the market witnessed sustained buying interest from the Bulls for the most part of the trading day which is a bullish sign.

The index has been making higher top – higher bottom formation on the weekly charts and till it holds above 9,928 mark, the trend may remain intact to head towards 10250-10350, suggest experts.

A bullish candle formed on the daily chart after a Hammer like pattern on Monday signifies Further upside in the upcoming sessions. Traders can stay long on the index with a stop below 9944 with a target of 10,350.

The index opened at 10,034.70 and slipped marginally in opening trade to 10,016.95. It bounced back from its 5-DEMA to hit its intraday high of 10,085.90 before ending the day at a fresh closing high of 10,077.10.

“The Nifty50 continued its upward thrust as it consistently traded above 10,000 levels throughout the trading session, as it registered a decent bull candle, suggesting that traders are slowly getting confidence about the sustainability of this up move above this historical land mark,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Hence, we advise traders to maintain positive bias and ride this momentum with a stop below 9,944 levels for a target of 10,350. However, weak negative breadth is still a cause for concern and any disappointment from RBI monetary policy can provide enough ammunition to bears which can aid them in halting this rally,” he said.

On the options front, maximum Put OI was seen at strike prices 10,000 followed by 9,800 while maximum Call OI was seen at strike prices 10,500 followed by 10,100.

Fresh Put writing was seen at 10000, 9900 and 10100 strikes which suggest that Put writers are keeping the tight grip on the market to push it to higher zones.

“OI concentration is scattered at different strikes but maximum Call OI is shifted at 10500 which is giving the scope for a further upside,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“On the technical front, Nifty formed a bullish candle on the daily chart and registered a highest daily close. It has been respecting to its rising support trend line by connecting the recent swing lows of 9543, 9646, 9838 and 9944,” he said.

Taparia further added that the index has to continue to hold above 10,020 to witness a fresh rally towards 10,250 zones while support is shifting higher to 9,950 marks.