India VIX moved up 1.52 percent at 14.72. VIX has to remain between 13.50-13 zone to start the fresh leg of up move in the market.
The Nifty50 which started on a muted not dipped below key support levels in intraday trade on Wednesday before bulls took control and pushed the index above 10,400 levels for the second consecutive day in a row.
The index formed a ‘Hanging Man’ like pattern on the daily candlestick charts which is a bullish reversal pattern. The index bounced back after touching its short-term moving average (5-DEMA) placed at 10,360.
A Hammer consists of no upper shadow, a small body, and long lower shadow. The long lower shadow of the Hammer signifies that it tested its support where demand was located and then bounced back.
The index stayed above its crucial support of 10,400 but most technical experts feel that the momentum is stalling and investors should trade with a strict stoploss below 10,350 for all long positions.
Bears took control of the Nifty soon after the opening as the opening and the intraday high level of the Nifty is the same. The index opened at 10,428.15 and slipped to touch its intraday low of 10,355 before closing the day at 10,417 up 14.90 points.
“The Nifty50 closed the day on a cautionary note as it registered Hanging Man kind of formation after Tuesday’s Doji kind of indecisive pattern. Usually Hanging Man formation is visible around the short-term turning points suggesting exhaustion in the ongoing upmove,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“In line with this pattern, today’s advance-decline ratio was skewed in favour of bears as more number of stocks declined than a number of scrips which closed in positive terrain. Besides momentum oscillators on short-term charts are in overbought zones with no apparent sell signals on short-term charts,” he said.
Mohammad advises traders to remain cautiously optimistic and look for a breakout above 50 Day Simple Moving Average, whose value is placed around 10,425, on closing basis.
“Once the said average is decisively conquered then this leg of uptrend can get extended itself towards 10600 kind of levels. On the downsides, the level of 10350 shall be assumed to be a sacrosanct support and a close below the said level shall enhance selling pressure,” he said.
India VIX moved up 1.52 percent at 14.72. VIX has to remain between 13.50-13 zone to start the fresh leg of up move in the market.
On the options front, maximum Put OI was seen at 10000 followed by 10300 strikes while maximum Call OI was seen at 10500 followed by 10600 strikes.
Significant Put writing was seen at 10400 and 10300 strikes which is shifting its support on a higher side while Call writing is seen at 10600 followed by 10400 strikes.
“Option band suggests a broader trading range in between 10,300 to 10,500 zones. Technically, Nifty index formed a Hammer Candle as it fell down to 10,355 then it recovered to close above 10400 zones. It engulfed the trading range of the last session but witnessed buying interest from lower levels,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“Price pattern indicates that absence of buying is seen at higher levels while the decline is being bought which suggests a positive to range bound move in the market,” he said.
Taparia further added that it has to hold above 10,380 zones to witness an up move towards 10,480 zones while on the downside supports are seen at 10,350 then 10,333 levels.