Technical View: Nifty forms bearish candle on weekly charts, experts say avoid positional longs

The Nifty50 recouped some of the previous day's losses and remained higher for major part of the session on October 16 backed by positive European cues, and buying in banking & financials, metals and pharma stocks.

The index closed above 11,750 and formed small bodied bullish candle on the daily charts as closing was higher than opening levels, while there was a bearish candle formation on the weekly scale as it lost 1.3 percent for the week.

Experts feel 11,661 is expected to be a crucial level and if the index holds the same in coming days, then it can move towards 11,900 mark again.

For the time being, Mazhar Mohammad of Chartviewindia.in advised traders to avoid positional longs but should consider shorting rallies on early signs of weakness.

India VIX fell by 1.88 percent from 22.06 to 21.64 levels. VIX needs to cool down below 19 levels for market stability but volatility could spike ahead of US election, Chandan Taparia of Motilal Oswal said.

The Nifty50 opened higher at 11,727.40 and drifted lower to hit an intraday low of 11,667.85 in initial hour of trade, but immediately rebounded and stayed strong to touch a day's high of 11,789.75. The index settled at 11,762.50, up 82.10 points.

"It appears to be the day of consolidation on the bourses as Nifty remained in a range of 120 points before signing off the session with a small bullish candle which resembles an indecisive Spinning Top," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

However, "last Thursday's bigger cut appears to have catapulted the near term trend in favour of bears. Hence, rallies may not sustain but remain vulnerable for a sell off and as long as Nifty sustains above 11,661 levels then it can make an attempt to recoup some of the losses by rallying into the zone of 11,843 – 11,885 levels," he said.

If the index breaches 11,661, then it shall not only resume the downswing with initial targets present in the zone of 11,500 – 11,400 levels but also confirm a multi-week top around 12,025 levels, according to him.

On option front, maximum Put open interest was seen at 10,500 followed by 11,000 strike, while maximum Call open interest was at 12,500 followed by 12,000 strike. Call writing was seen at 11,700 then 12,100 strike while Put writing was seen at 11,700 then 11,500 strike.

The abovementioned option data suggested that an immediate trading range for Nifty could be 11,500 to 12,000 levels.

Bank Nifty opened higher at 23,219.85 and witnessed buying interest to hit an intraday high of 23,646.20 after taking support at 23,150-23,200 zones.

The index rallied 460.90 points or 2 percent to close at 23,533.30 and formed a bullish candle on daily scale, but a bearish candle on weekly which suggests a range bound bias in broader trading range. It lost 1.3 percent for the week.

"Now Bank Nifty has to hold above 23,500 to witness an upmove towards 23,750 and 24,000 while on the downside support exists at 23,150 then 23,000," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Positive setup was seen in JSW Steel, Tata Steel, Voltas, Hindalco, Divis Labs, SRF, Muthoot Finance, HDFC Bank, Grasim, ACC, UltraTech Cement, Ambuja Cements and Tata Chemicals while weakness was seen in UPL, Zee Entertainment, M&M, Reliance Industries, Sun Pharma and Vedanta, he added.