Tech View: Nifty forms long lower shadow on candles; 12,000 key level to watch

Nifty50 on Wednesday witnessed a sharp recovery from the low point of the day and recovered 162 points before ending the volatile session in the green. According to market experts, some short covering helped the 50-share index pare its intraday losses.

Before closing nearly 41 points, 0.34 per cent, higher at 11,938, the index shuttled between an intraday high and low of 12,018 and 11,776, respectively.

During the process, it formed a small bearish candle on the daily chart with a long lower shadow. Commenting on the huge swing during the day, Milan Vaishnav, Consulting Technical Analyst and Founder, Gemstone Equity Research and Advisory, said, “The strike of 12,000 continued to hold the maximum concentration of Call OI despite the market moving past that level briefly. This led to profit-taking from a higher level.”

He further added that the formation of the long lower shadow near the crucial resistance point of 12,000 reinforces the belief that the level is a key resistance point for the market.

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Aditya Agarwala, Senior Technical Analyst, YES Securities, added that bulls protected the first line of defence placed at 11,775-11,800, which triggered a late short-covering.

Going ahead weekly options expiry will dominate the trade on Thursday. It was the fourth session that stayed within a broad range formed on October 15.

Market analysts expect Nifty to stay within a defined range unless the level of 12,000 is not taken out convincingly. “The market will stay vulnerable to profit taking bouts at higher levels,” said Vaishnav.


On the other hand, Agarwala said, “If bears push the index below 11,870 corrections can resume dragging it lower to levels of 11,775-11,650.”

Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in, said, “A sustainable close above 12,000 levels shall open up initial targets of 12,225 levels. Considering the sharp swings of the market in both the directions, traders are advised to remain neutral by adopting a stock-specific approach but fresh buying opportunity in the index shall arise only on a close above 12,000 levels.”