Technical View: Nifty forms #39;Bearish Belt Hold#39; pattern; 11,393 crucial for bulls

September 10
18:29 2018

The Nifty50 after opening gap down extended losses as the day progressed and broke the psychological 11,500-mark on Monday, tracking further weakness in Indian rupee which ended at record closing low of 72.45 to the dollar. The renewed trade tensions between US and China also dented market sentiment.

The index closed sharply lower, forming ‘Bearish Belt Hold’ pattern on the daily candlestick chart.

A ‘Bearish Belt Hold’ pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day making up for the large body. The candle will either have a small or no upper shadow and small lower shadow.

The Nifty50 opened lower at 11,570.25 and extended losses to decisively break 11,500 levels. The index hit an intraday high of 11,573 and low of 11,427.30, before closing down 151 points or 1.30 percent at 11,438.10.

“Negative cues from the Emerging Market space appears to have ruined the chances of pull back rally as Nifty50 registered a large bearish candle which resembles a bearish belt hold pattern suggesting a fresh downward pressure on the indices,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said with rupee looking vulnerable with a fresh breakdown which has opened a downside target of 73.74 levels, bears of equity markets will swear to pull down the indices further towards their 100-day EMA which value is placed around 11,060 kind of levels. This kind of weakness can be expected on a close below recent swing low of 11,393 levels.”

However, in between meaningful support can be expected in the zone of 11,200–11,150 levels, according to him.

On the upsides, he said pull back rally will not resume unless Nifty50 closes above 11,603 levels. “Hence, aggressive traders can consider fresh shorts on breach of 11,390 levels by placing a stop above day’s high.”

The India Volatility Index increased by 10.07 percent to 15.29.

Maximum call open interest (OI) of 45.25 lakh contracts was seen at the 11,800 strike price, which will act as a crucial resistance level for September series, followed by the 11,600 and 11,700 strikes.

Maximum put open interest of 44.29 lakh contracts was seen at the 11,400 strike price, which will act as a crucial support level for September series, followed by the 11,500 and 11,000 strikes.

Highest Call writing was seen at 11,600 strike followed by 11,700 and 11,500 while Put writing was seen at 11,100 followed by 11,200 and 10,900.

“As expected, the Golden Ratio mark proved to be the key level from where reversal has taken place. The key Fibonacci level attracted fresh round of selling. Consequently, the index has started next leg down today,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas said.

He further said in terms of the price patterns, the pullback had taken form of a bearish wedge pattern on the hourly chart. “The pattern broke out on the downside with a breakaway gap, which led to the sustained fall for the day. On the way down, the index has broken lower end of the rising channel as well.”

From short term perspective, 11,350-11,300 will be the target area to watch out for and on the other hand, 11,500-11,550 will act as an immediate hurdle zone, he feels.

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