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Technical View: Nifty forms bearish candle; 11,500 crucial for bulls

September 04
18:29 2018

The Nifty50 extended losses for the second consecutive session on Tuesday, falling briefly below 11,500 levels intraday after the rupee hit record low of 71.57 to the dollar and rising crude oil prices. The index closed sharply lower, forming bearish candle on the daily charts.

All sectoral indices closed in the red with Bank, Auto, FMCG, Metal and Pharma correcting upto 2 percent while IT was the only gainer, rising 2 percent on rupee weakness.

The midcaps and smallcaps hit hard as the Nifty Midcap and Smallcap indices fell more than 2.5 percent.

The Nifty50 remained volatile from the beginning of trade, opening at 11,598.75 and closing at 11,520.30. The index after opening higher fell immediately and bounced back to hit an intraday high of 11,602.55, but erased those gains to trade lower. It managed to rebound in afternoon but failed to hold those gains and hit an intraday low of 11,496.85 before closing 62.10 points down at 11,520.30.

“Nifty50 continued its journey on downward trajectory as intraday pull back attempts attracted fresh bout of selling pressure before signing off the session with a bearish candle,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said however, as Nift50 is trading into its initial support levels placed in the zone of 11,500–11,480 bulls can make one more pull back attempt in next trading session. “Hence, as long as Nifty50 doesn’t drift down below 11,480 levels some sort of relief can be expected for bulls in next couple of trading sessions.”

He feels a close below 11,480 will further accentuate the selling pressure initially towards 11,424 levels and as this entire corrective phase is expected to last for couple of weeks with a top in place around 11,760 levels traders are advised to make use of rallies if any to exit their stuck up positions and should wait for some signs of strength before creating fresh longs.

On the upside a close above 11,600 can be expected to give some relief to the bulls, according to him.

India VIX moved up by 2.87 percent to 13.78 and a sudden jump in volatility in last two sessions is a cause of concern for immediate basis.

On option front, maximum Put open interest (OI) is at 11,500 followed by 11,400 strike while maximum Call OI is at 11,800 then 12,000 strike. Meaningful Call writing was seen at 11,800 followed by 11,700 strike whereas Put unwinding was seen at all immediate strike price.

“The index has slipped below its rising support trend line. It also engulfed the positive price movement of last two weeks and partially filled a gap near to 11,499 marks,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.

He further said now till it holds below 11,620 it may drift towards next support at 11,450 zones while on the upside hurdle is seen at 11,620 levels.

Bank Nifty broken its crucial nineteen session support zones of 27,750 zones and corrected sharply by 389 points to close the session near 27,430 mark.

The index underperformed the benchmark index and formed a Bearish Candle on daily scale which suggest Bears are holding tight grip in the market, experts feel.

Taparia said now if it sustains below 27,750 then weakness may be seen towards 27,250 then 27,165 zones.

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