Technical View: Nifty starts 2018 with a bearish candle; tread with caution

Bulls remained in control of D-Street for the most part of the trading day on Monday but bears took control of D-Street in the last 60 minutes of trade. The index formed a large bear candle on the daily candlestick charts.

The index slipped below its crucial psychological support of 10500 and its 5-days exponential moving averages (DEMA) placed at 10,474, and any follow-up selling in the next trading session shall confirm a short-term reversal.

The Nifty50 which opened at 10,531 rose to an intraday high of 10,537 but then bears took control and pushed the index below 10,500 to touch its intraday low of 10,423. The index finally closed 95 points lower at 10,435.

Investors are advised to stay cautious and book partial profits on their long positions. Any follow up selling in the next trading sessions could tilt the trend in favour of bears at least in the short term.

The Nifty50 appears to have broken down from its small consolidation range of the last 4 sessions as bulls are unable to get past their formidable resistance level of 10550.

“Monday’s price action is nothing short of a reversal kind of formation as the index registered a large bear candle and turned down from the highest point of the day in the last hour of the trading session,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Hence, any follow-through selling in next session shall confirm short-term reversal and the index could be heading to much lower levels with initial targets placed around 10250. As long as the index trades below 10550 levels then bears will try to be in commanding position,” he said.