Technical View: Nifty forms a Bearish Belt Hold pattern; use rallies to create short positions
The Nifty50 which started on a positive note failed to hold on to momentum and breached its 5-days exponential moving average on Monday. The index closed below its crucial support placed at 11,600 and made a robust bear candle on daily charts which resembles a Bearish Belt Hold kind of pattern.
The Nifty index found support at 13-days exponential moving average (EMA) before closing the day at 11,582, down nearly 1 percent from the previous close of 11,680.
Traders are advised to tread with caution and use rallies to create short positions. The short-term trend will favor bears as long as Nifty trades below 11,760 levels suggest experts.
“Finally bulls appear to have surrendered as they were trapped near to the lifetime highs as the index opened with a strong gap-up before signing off the session with a robust bear candle. This reversal formation confirmed the short term top around 11760 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in.
“As the index settled below its ascending channel which was in progress from the lows of 10557 for the last 45 days it has opened up a new downside target placed around 11425 levels. However, in between a decent support can be expected in the zone of 11499 – 11486 levels breach of which shall further accelerate the selling pressure,” he said.
Mohammad advises traders to create fresh short positions by making use of pullback attempt as index head towards 11,650 levels. “Short-term trend shall continue to favor bears till Nfty50 closes above 11760 levels,” he said.
India VIX spiked up by 6.29 percent at 13.39 and a sudden jump in volatility is a cause of concern for immediate basis.
On the options front, maximum Put OI is placed at 11,600 followed by 11,400 strikes while maximum Call OI is placed at 11,800 and then towards 12,000 strikes.
Meaningful Call writing was seen at 11,800 followed by 11,700 strikes whereas Put activities is also seen at 11,800, 11,700 and 11600 strikes.
“The Nifty index failed to hold its opening zones and drifted sharply towards 11567 levels in last half an hour of the trading session. It has broken its rising support trendline by connecting all the recent swing lows and slipped below its immediate support of 11620 zones,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“It formed a Bearish Belt Hold candle on the daily chart as it made its opening high and closed near to the lowest part of the session. It has to cross and hold above 11620 and 11666 zones to get a stability else it may even drift towards next support at 11500-11450 zones,” he said.
Taparia further added that the index witnessed a sharp cut of around 184 points from its opening high zones and made a biggest negative daily candle in last many trading sessions which indicates that now bears are back in the market to pause its positive momentum.