Technicals: Nifty forms ‘Hammer candle’ on daily chart; may breach 7,980

By: | Published: June 24, 2016 4:22 PM

Nifty index opened negative with the deep cut of around 240 points in line with the negative cues from Brexit Referendum where people voted more in the favour to exit from European Union.

nse niftyNifty index opened negative with the deep cut of around 240 points in line with the negative cues from Brexit Referendum where people voted more in the favour to exit from European Union. (Photo: PTI)

Nifty index opened negative with the deep cut of around 240 points in line with the negative cues from Brexit Referendum where people voted more in the favour to exit from European Union. Index had broken its consolidation band of 8,065 to 8,300 zones on lower side and slipped towards 7,927 mark. During the day once it was traded with the sharp cut of around 343 points but it recovered half of the losses as it rebound by around 175 points from lower levels in the second half of the session. After a volatile move index finally closed with the loss of around 200 points below 8100 levels.

In the entire process, Nifty made a “Hammer candle” on daily chart as it open negative then fell down but recovered half of the losses. Hammer candle indicates that sustained buying is being witnessed in the market but on higher side in the absence of follow up buying market is not chasing for upper trading range.

Nifty made a Doji candle on weekly chart as having a small real body with big upper and lower shadow, usually a doji candle means that bulls and bears both are fighting in the market to get their grip and closing the market without any decisive consideration. But here we have to remember that a Doji candle after a strong rally some time may cause a trend reversal but market is ruling out that possibility as index has been making higher top – higher bottom formation.

Now index has to hold above 7,960-7,980 zones to witness a range bound move while on upside holding above 8,150 may open a scope for texting next hurdle of 8,242 zones. But now till it doesn’t reclaim 8,150 zone street may remain shaky with the fear of retesting recent lows of 7,980-7,960 then 7,927 levels.

Index fell down below its 50-day exponential moving average but managed to hold the same on closing basis.

So overall index may again get stuck in trading range for a while, a require trigger only to surpass a crucial wall of resistance at 8,300 zones to start the next leg of rally. Recent development has given a dent in to its consolidation breakout and immediate hope for moving higher.

We have seen a spike in INDIA VIX in the morning session towards 21-mark but it cooled down from highs and remained at 18.62 levels.

Index lost around 2.20 per cent and wiped out all the gains made in the June series.

On the option front, maximum Put OI is intact at 8,000 followed by 8,100 strike while maximum Call OI is at 8,400 followed by 8,300 strike. We have seen huge Call writing at 8,200, 8,100 and 8,000 strike which may keep the limited upside and range bound move in the market for the next couple of sessions of this expiry contract.

Bank Nifty opened negative and broken a consolidation range by trading below 17,500 levels then it fell down towards 17,000 zones. However it recovered well in second half of the session and headed towards 17,459 mark. Now it has support at 17,000 zones while hurdle at 17,750 then 18,000 zones.

(The author is derivatives analyst, equity research at Anand Rathi Financial Services)

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