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Nifty forms bearish candle; keep stop loss below 10,237 for long positions

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The Nifty50 rose to a fresh record high of 10,366.15, but failed to hold on to momentum and closed below its opening level, making a bearish candle on the daily candlestick charts on Friday. The index closed with gains of 1.7 percent for the week ended October 27.

Some amount of profit booking was expected at higher levels but the major trend is intact and investors should continue to hold their long positions with a tight stop loss placed at 10,237 level.

On weekly basis index rallied by 1.74 percent and given a strong closing near to new high territory which could keep the bullish sentiment.

The Nifty50 which opened at 10,362.30 rose to a record high of 10,366.15. The index failed to keep the momentum going and slipped to an intraday low of 10,311.30. Nifty closed 20 points lower at 10,323.05.

“On the weekly charts, it is looking like a decisive breakout above the range of 10,200 – 9,700 with a robust bull candle whereas on the daily charts Nifty50 registered a small bearish candle to kick off the new series over the weekend,”

“This kind of price action can be due to a combination of factors like low conviction at higher levels accompanied with a weekend phenomenon in which traders don't like to carry forward positions in uncertain times,”

Technically speaking weakness may not materialise unless Nifty50 closes below 10,237 level. However strengthening momentum on weekly charts is still pointing the needle towards further upsides may be in the critical zone of 10,400 –10,600 levels.

India VIX fell by 1.25 percent at 11.47. Falling volatility is giving comfort to bulls and suggesting this rally to extend for higher zones.

On the options front, maximum Put OI was seen at 10,000 followed by 10,200 strikes while maximum Call OI was seen at 10500 followed by 10400 strikes.

“Option band signifies the shift of range to higher zones with the upside scope of 10,500 in the November series. It formed a small Bearish candle but major trend is intact to positive till it holds above 10,250 zone,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Now, it has to hold above 10,300 to witness an up move towards 10,400 and then towards 10,500 while on the downside supports are seen at 10,250 and then towards 10,178.

Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
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