Formation of a small-bodied candle after two bearish candle signifies indecisiveness. The index managed to bounce back by over 40 points after it hit an intraday low of 10,266.95 in trade today.
The Nifty50 which opened at 10,358 rose marginally to intraday high of 10,368.45 before closing the day just above its crucial psychological support level of 10,300 at 10,308. The index made a small-bodied candle or a bearish candle (intraday) on the daily candlestick charts on Thursday.
Formation of a small-bodied candle after two bearish candle signifies indecisiveness. The index managed to bounce back by over 40 points after it hit an intraday low of 10,266.95 in trade today.
The outlook for Indian markets is still cautious as the Moving Average Convergence and Divergence, popularly known as MACD, confirmed a bearish crossover signal on the daily charts for the first time since April.
Traders are advised to tread with caution and maintain a strict stop loss below 10,260 and a breach of the said level could fuel further downside on the charts.
“It appears that stage is set for a pullback rally as Nifty50 recovered smartly from day’s low of 10267 to register a small-bodied candle. Interestingly, this pullback occurred after retracing 62% of its last leg of a rally from the lows of 10123,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“We expect the rally to get extend initially up to 10,384 levels and thereafter 10,445 can’t be ruled out, but as of now no momentum oscillator has generated a buy signal on lower time frame charts and hence sustainability of this pullback attempt will remain doubtful till some of the momentum oscillators generate buy signal,” he said.
Mohammad further added that traders are advised to remain cautious and maintain a market stop of 10260 as a breach of this level can extend the downswing and may cap the upsides at 10490 levels for quite some time.
India VIX fell down by 2.52 percent at 13.26. A decline in VIX after the jump of last three sessions suggest some stability could be seen but to get a smooth ride, volatility has to cool off below 12.50 levels.
On the options front, maximum Put OI is seen shifting towards 10200 followed by 10000 strikes while maximum Call OI is at 10500 followed by 10,400 strikes. Fresh Put writing at all 10200 while Call writing is seen at 10400, 10700 and 10800 strike.
“Nifty index formed a Bearish candle and has been making lower highs – lower lows from last three trading sessions. Now if it negates the formation then only short-term negativity could take a pause,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“If the index sustains below 10,300 then weakness could be seen towards 10,250 then 10,178 while on the upside hurdles are seen at 10,380 then 10,450 levels,” he said.
