Technical View: Nifty forms 'Long White Day' pattern; 10,785 crucial for bulls

Bulls were back at Dalal Street on Friday as the Nifty50 started off the July series on a strong note, recouped all previous day's losses and closed above 10,700. The index made a 'Long White Day' Pattern on the daily charts and Hammer Candle pattern on the weekly scale.

The 50-share NSE Nifty, which opened higher at 10,612.85 gained momentum in the later part of the session. The index hit an intraday high of 10,723.05, before closing above its crucial 50-DEMA. It ended the first session of July series at 10,714.30, up 125.20 points or 1.18 percent.

The index witnessed a strong reversal from the bearish trend made in last two trading sessions but for bulls to take control, the index needs to close above 10,785 in the coming session for confirmation, experts said.

For investors who went long on the index on Friday should keep a trailing stop loss placed below 10,600.

"Bulls appears to have made a strong counter attack as Nifty50 signed off the session with a Long White Day kind of formation as it witnessed surprisingly sustained buying interest throughout the day and went on to erase around 62 percent of severe losses witnessed in preceding two sessions," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He feels if similar strength continues even in the next trading session then the possibility of a bottom being in place at Thursday’s low of 10,557 will be much higher and the same can be confirmed with a close above 10,785 by next Monday.

However, as Nifty and Bank Nifty futures both are trading at a discount to spot levels is either suggesting lack of conviction about the sustainability of this rally or building up of short positions at higher levels, he said.

He further said hence, traders at this juncture will be better off by waiting for one more session to get a confirmation of strength in this regard. "For fresh long positions a stop below 10,600 looks prudent breach of which shall signal the end of current pullback attempt.

India VIX fell down by 7.26 percent at 12.93 levels. On the option front, maximum Put open interest (OI) was seen at 10,600 followed by 10,500 strike while maximum Call OI was at 11,000 followed by 10,800 strike.

Significant Put writing was seen at 10,600 followed by 10,700 while Call writing was seen at 11,000 and then 10,800.

Experts feel option band signifies a trading range between 10,650 to 10,800 zones.

"Maximum Put OI at near the strike indicates participants are not expecting dips even after sharp selling in the most part of the week of expiry days," Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Securities told Moneycontrol.

He said the Nifty index managed to recover its entire previous day losses and closed above its crucial 50-DEMA. "It formed a strong Bullish Candle on the daily scale and a Hammer Candle on weekly scale suggests that decline is again being bought into the market."

Now till it holds above 10,660 zones, it could extend its gains towards 10,770 then 10,835 zones, while on the downside supports are seen at 10,660 then 10,620 levels, Taparia said.