Technical View: Nifty forms bearish candle, tread with caution ahead of exit poll
The Nifty50 opened sharply lower in line with the weak global cues and witnessed selling pressure throughout the session on Thursday as investors cautiously await five states elections exit poll due on Friday.
The index decisively breached its 200 DEMA and formed a bearish candle on daily charts.
The sentiment turned weak and if the index breaks 10,500 then the correction could be sharp in coming sessions, experts said, adding the states elections results due on December 11 would be closely watched by the Street.
The Nifty50 after sharp gap down opening at 10,718.15 extended losses as the day progressed and fell below 10,600 levels to hit an intraday low of 10,588.25. The index closed at 10,601.20, down 181.70 points or 1.69 percent.
“Nifty50 decisively breached its 200-day moving average, with a strong bear candle after a gap down opening, perhaps signalling the end of a pull back rally at recent highs of 10,941 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said confirmation in this regard will occur if Nifty50 breaches 10,489 levels in next 2 sessions as it will be completing faster retracement of its last leg of rally from 10,489 to 10,941 levels.
In such a scenario all the rallies should be utilised to create fresh shorts with initial targets placed around 10,191, he added.
Mazhar said for time being, in ideal scenario, upsides shall be capped around 10,747 but as market is heading for a binary event traders should not be surprised if the said level 10,747 is not respected by bulls on positive news flows. “In any case, as of now 10,941 looks like an intermediate top.”
India VIX moved up by 5.62 percent to 19.42 levels. VIX is not ready to cool down and hovering at higher band suggests restricted upside and volatile swing in the market, experts said.
On the option front, maximum Put open interest (OI) was seen at 10,000 followed by 10,200 strikes while maximum Call OI was seen at 11,000 followed by 10,900 strike.
Meaningful Call writing was seen at 11,000 followed by 10,700 strike while Put unwinding was seen at most of the immediate strikes. Option band signifies a lower trading band between 10,500 to 10,800 zones.
“The Nifty index formed a Bearish Marubozu candle on daily scale. It has been making lower highs – lower lows from last three trading sessions and also broken two crucial support of 10,777 and 10,650 zones,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.
Now till it holds below 10,777 it could extend its weakness towards next meaningful support of 10,550 then 10,480 zones while on the upside immediate hurdle is seen at 10,650 then 10,777 levels, he added.
Bank Nifty continued its negative momentum and slipped by more than 350 points to settle at 26,200 zones. It is forming lower highs – lower lows from past three trading sessions. The index closed 321.30 points lower at 26,198.30.
“It has broken immediate support of 26,666 and 26,350 levels and now till it holds below 26,350 zones, it could extend its weakness towards 26,000 then 25,800 levels while on the upside medium term hurdle is seen at 26,666 levels,” Taparia said.