Technical View: Nifty forms #39;Bearish Belt Hold#39; pattern; could hit March low of 9,950 soon
Bears tightened their grip on Dalal Street for second consecutive session on Friday as the Nifty50 closed volatile session sharply lower but managed to defend psychological 10,000 levels.
The index formed large bearish candle which resembles a ‘Bearish Belt Hold’ kind of pattern on the daily charts as well as weekly scale.
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.
The index failed to surpass previous support of 10,138 and corrected towards 10,000 zones intraday by making fresh seven month low levels indicated that there could be possibility of breaking March lows of 9,950 levels in coming sessions, experts said.
The Nifty50 after opening flat at 10,122.35 immediately corrected sharply to hit an intraday low of 10,004.55. The index made many attempts to hold 10,100 levels amid volatility, but failed and finally closed 94.90 points lower at 10,030.
“Bears continued their strength without giving any chance of pullback as intraday attempts of recovery by bulls from around 10,100 levels were thwarted thrice by the bears before signing off the session with a bearish candle which resembles a Bearish Belt Hold formation whereas on weekly charts it appears to be a strong bear candle with a 400-point range pointing towards the severity of correction,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said as bulls are unable to make any meaningful recovery the chances of dipping below 9,950 to complete one corrective structure looks bright in next couple of trading sessions.
As markets are remaining choppy and volatile, Mazhar advised traders to take neutral stance till some sort of stability or strength is seen in the markets as even creating fresh shorts around these levels looks risky as markets are reaching critical support points.
India VIX moved up by 3.21 percent to 19.57 levels. Volatility is not cooling down further and that is the concern for the market. It has to go down below 17-16 zones to rescue the bulls after the sharp cut of last two months, experts said.
On option front, maximum Put open interest (OI) was seen at 10,000 followed by 9,800 strike while maximum Call OI was seen at 10,500 followed by 10,800 strikes. Call writing was seen at 10,100 followed by 10,400 strike while Put writing was seen at 10,000 followed by 9,800 strike.
“Now till the index remains below 10,130 zones weakness could continue towards 9,952 then 9,800 zones while on the upside hurdle is shifting towards 10,250 then 10,333 zones,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.
Bank Nifty breached its crucial support level of 24,650 mark and slipped sharply in last hour of trading session towards 24,350 level. The index closed 396.40 points lower at 24,421.05.
It formed a bearish candle on daily and weekly scale which suggests bears are holding tight grip in the market, experts believe.
“Now till Bank Nifty holds below 24,650 it can slip towards 24,000 and even lower levels while on the upside hurdle is seen at 25,000 zone,” Taparia said.