Technical View: Nifty forms large bearish candle for second straight day; support seen at 11,200

September 11
18:29 2018

The Nifty50 after opening gap up remained volatile in morning but wiped out all gains in later part of the session to breach psychological 11,300-mark on Tuesday. Further weakness in rupee and trade war tensions hit market sentiment.

The market corrected sharply for the second consecutive session, forming large bearish candle which resembles like ‘Bearish Belt Hold’ kind of 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 after opening gap up at 11,476.85 managed to hit an intraday high of 11,479.40 amid volatility in morning, but suddenly in the last couple of hours of trade it started falling sharply to break 11,300-mark and hit day’s low of 11,274.

The index closed 150.60 points or 1.32 percent lower at 11,287.50.

“Nifty50 registered a large bear candle for second day in a row suggesting that the market is in the clutches of bears as of now,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

However, as momentum on the downside picked up it is fast approaching its critical supports placed between 11,100–11,050 levels where it can be expected to hit a bottom, he said.

He further said in between meaningful support is available around 11,200 levels where it may make an attempt to stabilise in the next session as bears will like cover their shorts ahead of Thursday’s holiday.

On the upsides unless it registers a close above 11,480 levels near term strength will not be expected in the broader markets, he feels.

India VIX rose by 0.14 percent to 15.22.

On the option front, maximum call open interest (OI) of 46.87 lakh contracts was seen at the 11,800 strike price followed by 11,600 and 11,500 strikes while maximum put open interest of 42.94 lakh contracts was seen at the 11,400 strike price followed by 11,000 and 11,500 strikes.

Call writing was seen at strike price of 11,400 followed by 11,500 and 11,600 strikes while Put writing was seen at the strike price of 11,100 followed by 11,200 and 10,900 strikes.

Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas said in the near term, the correction in the index can extend lower towards 11160 i.e. 50 percent retracement level of its previous rise.

On the way up, 11,371–11,479 will act as resistance, he feels.

According to him, the bears are likely to dominate in the forthcoming trading sessions as the index has closed below 40DEMA. “Since the index has achieved short term target of 11,300, we have revised it lower to 11,160.”

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