Technical View: Nifty forms #39;Bearish Belt Hold#39; pattern; 10,200 crucial for bulls
Bears retained their charge on Dalal Street for third consecutive session on Monday as the Nifty50 failed to hold on to its opening gains amid volatility and turned sharply lower in last hour of trade despite strong global cues.
The index closed below psychological 10,300 levels and formed large bearish candle which resembles a ‘Bearish Belt Hold’ kind of pattern on the daily charts.
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 a small lower shadow.
Monday’s intraday price action is clearly favouring the bears as two attempts by the bulls, during the course of the day, succumbed to the pressures of bears who succeeded in pushing the indices to much lower levels,” experts said.
The Nifty50 saw strong gap opening at 10,405.85 to hit an intraday high of 10,408.55, but wiped out all gains in morning itself and turned volatile. The index after that volatility slipped into red in last hour of trade to hit day’s low of 10,224. It closed 58.20 points lower at 10,245.30.
“In line with our projections Nifty50 was sold off as it opened into the bearish gap area of 10,380-10,436 levels, which was registered in last Friday, before signing off the session with a strong bearish candle,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said once the bulls give up the psychological support point of 10,200 levels bears will swiftly breach recent swing lows of 10,138 and eventually look to take the indices below 10,000 levels.
However, as index has fallen by around 500 points in last three sessions from the highs of 10,760 a pull back rally can’t be ruled out owing to profit booking by the short sellers ahead of the expiry, he feels.
On such pull backs unless bulls manages a close above 10,710 levels the trend shall continue remain in favour of bears, he said.
India VIX moved up by 7.87 percent to 21.34. Spurt in volatility suggests that upside could be restricted again in the market. Recent high of VIX is at 21.76 and above that It could be wild to head towards 24 levels, expert said.
On option front, maximum Put open interest (OI) was at 10,000 followed by 10,200 strike while maximum Call OI was at 10,500 followed by 11,000 strikes. Meaningful Call writing was seen at 10,300 followed by 10,400 while Put writing was seen at 10,200 followed by 10,000 strike. Option band signifies a shift in lower trading range with immediate support below 10,200 zones.
“The index formed a Bearish Belt Hold candle on daily scale as it started its selling pressure from beginning of the day to till the end of session. It gave a recent second lowest daily close and price setup suggests that bounce is being sold in the market,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.
Now till the index holds below 10,350 zones it could slip towards its crucial support of 10,200 then swing low of 10,138 mark while on the upside crucial hurdles are turning at 10,450-10,480 zones, he added.
Bank Nifty opened gap up but failed to hold above 25,500 zones and wiped out its entire gains in later part of trading session. The index closed 7.20 points lower at 25,078.60.
It formed a Doji candle with Long higher shadow which indicates that Bears are quite aggressive at higher zones.
“Now it has to cross and hold above 25,250 zones to witness a bounce towards 25,500 while a hold below 25,000 could drag it towards 24,650 zones,” Taparia said.