Technical View: Nifty forms bullish candle; holding 10,650 can take index above 10,800

Technical View: Nifty forms bullish candle; holding 10,650 can take index above 10,800



Bulls retained charge on Dalal Street Friday as the Nifty closed above its crucial resistance 10,650 levels, driven by follow-up buying amid positive global cues and rupee appreciation.

The index formed bullish candle on the daily charts and Hanging Man kind of pattern on the weekly charts.

A Hanging Man is a bearish reversal candlestick pattern which is usually formed at the end of an uptrend or at the top (more than 650-point rally from its recent low of 10,004 recorded on October 26).

In a perfect ‘Hanging Man’ pattern either there will be a small upper shadow or no upper shadow at all, a small body and long lower shadow.

In Friday’s trading session, the Nifty50 after opening higher at 10,644 hit an intraday high of 10,695.15 and low of 10,631.15. It remained in a positive terrain throughout the session and closed 65.50 points higher at 10,682.20.

On the weekly basis, the S&P BSE Sensex and Nifty50 rose around 0.9 percent each for the week ended November 16.

Most technical experts feel the Nifty closing above 10,650 levels indicated that bulls are getting an upper hand in the market, so 10,700-10,800 could be next crucial levels.

“Albeit Nifty50 appears to have registered a breakout, above its 8-day old consolidation zone between 10,440-10,650 levels, it is not looking that convincing enough as the said breakout is on the back of negative advance:decline ratio and with a 64-point narrow range which depicted a small bullish candle on daily chart where as a Hanging Man kind of formation on weekly charts,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said besides it appears to be facing selling pressure from its interim top of 10,710, which was registered on October 17, from where initial pull back rally was sold off only to make new corrective swing lows.

Apart from this 200-day moving average is placed around 10,754 levels; hence, entire zone of 10,710–10,844 is looking like a massive supply zone which bulls need to absorb to sail smoothly, he added.

On the downsides, he feels if the index slips below 10,630 levels then it may initially lead to the test of 10,440 in the near term.

India VIX rose 2.03 percent to 18.83 levels.

On option front, maximum Put open interest (OI) was at 10,000 followed by 10,200 strikes while maximum Call OI was seen at 10,800 followed by 11,000 strike. Put writing was seen at 10,600 followed by 10,700 strike while Call writing was seen at 10,800 followed by 10,700 strike which could restrict its upside momentum.

Option band signifies an immediate trading range in between 10,550 to 10,800 zones, experts said.

“Nifty index has been making higher lows from last three trading sessions and hovering near to its 50 DEMA. It formed a bullish candle on daily scale after an Inside Bar of last session while a Bullish Pin Bar on weekly scale,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.

Candle formation suggests that decline is being bought and bulls are getting upper hand in the market, he added.

He feels now the index has to continue to hold above 10,650 zones to witness an up move towards 10,750 then 10,800-10,850 zones while on the downside support exists at 10,550 levels.

Bank Nifty opened flattish and witnessed buying interest towards 26,300 zones. It has been making higher highs from last three trading sessions and recently given a consolidation breakout above 25,900-26,000 zones.

The index closed 90.80 points higher at 26,245.55 and formed a bullish candle on daily as well as weekly scale which indicates that bulls are holding the grip, experts suggest.

“Now it has to hold above 26,000 zones to extend its move towards 26,500 then 26,750 zones while on the downside support is seen at 25,800-25,750 zones,” Taparia said.

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