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Technical View: Nifty forms bearish candle, closes below 11K; 10,866 crucial support for Oct series

September 27
18:29 2018

The Nifty50 repeated its previous day’s trading pattern on Thursday, the expiry day of September futures & options contracts. The index opened sharply higher but after positive trade for first half an hour started drifting lower and extended losses as the day progressed to close below psychological 11,000 levels.

The index formed bearish candle again on the daily charts. The broadbased selling barring IT companies drove the market sharply lower, with NBFCs and select banks stocks hitting hard.

The Nifty Bank, Auto, Financial Service, Pharma and Realty indices were down 1-3 percent while the Nifty Midcap index underperformed frontliners, falling 2.3 percent.

The Nifty50 opened higher at 11,079.80 and closed sharply lower at 10,977.55. The index managed to rise up to 11,089.45, the intraday high, in first half of an hour of trade but suddenly wiped out those gains and remained weak for rest of the session to hit day’s low of 10,953.35. It closed 76.30 points lower at 10,977.50.

The sentiment continued to be weakened and if that worsens further then it could also break its recent panic low levels, experts said.

“Nifty50 continued to remain under pressure on expiry day as it registered another bearish candle post Tuesday’s strong recovery,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

In next session he said unless it sustains above 10,950 levels the test of recent panic low of 10,866 looks inevitable. “However, below 10,866 critical support appears to be placed around 10,797 levels breach of which shall strengthen the chances of extending this downswing upto 10,557 levels.”

He feels unless this index recovers and closes above 11,145 levels upside momentum shall not be expected. Hence, for time being Mazhar advised traders to refrain from going long and should look to consider fresh shorts below 10,800 levels for a target of 10,557.

The India Volatility Index fell by 2.2 percent to 16.71. On the options front, maximum Call open interest (OI) was seen at the 11,200 strike price, which will act as a crucial resistance level for the October series, followed by the 11,100 and 11,000 strikes while maximum Put open interest was seen at the 10,900 strike, which will act as a crucial support level for the October series, followed by the 10,800 and 10,700 strikes.

“The hourly chart shows that the Nifty is facing resistance near the 40-hour exponential moving average & the hourly upper Bollinger Band. The key hurdles, which are near 11,100-11,150 are keeping the pullback in check for last couple of sessions,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas said.

As long as the index trades below this hurdle zone, it is likely to drift lower, according to him. He feels immediate support is placed at 10,950 below which 10,815 shall be the short term target on the downside.

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