Technical View: Nifty forms #39;Bearish Belt Hold#39; pattern; rangebound trade may continue

January 10
18:29 2019

The Nifty50 saw consolidation throughout the session on Thursday and closed lower for the first time in last five trading days amid subdued global cues. Globally investors monitor trade war developments and monetary policy in the US.

The index formed bearish candle, which resembles a ‘Bearish Belt Hold’ 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.

After the index managed to respect 10,800 levels, experts expect the rangebound trade to continue before the directional move on either side.

The Nifty50 after opening flat at 10,859.35, which was also an intraday high, gradually drifted lower amid consolidation and hit a day’s low of 10,801.80 in last hour of trade. The index closed 33.60 points lower at 10,821.60.

“Nifty50 appears to have registered a ‘Bearish Belt Hold’ kind of formation despite trading inside a narrow range of 57 points. This kind of price action post brisk recovery witnessed in last Wednesday’s session is clearly pointing out the sideways nature of the market inside the triangular formation which appears to be in last leg of its culmination,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said a swift move in either of the directions can be witnessed in next couple of sessions based on the direction of the breakout.

Hence, he advised traders to focus on the levels which can facilitate such a directional move going forward.

On upside a breakout above 10,923 shall create a sustainable rally whereas on downside a close below 10,700 may weaken the indices eventually dragging it down towards 10,550 kind of levels, he said, adding till such a directional move arises it looks prudent for traders to remain on sidelines and initiate in the direction of a breakout.

India VIX marginally moved up by 0.26 percent at 15.31 levels.

On the option front, maximum Put open interest (OI) was seen at 10,500 followed by 10,000 strike while maximum Call OI was at 11,000 followed by 11,200 strike.

Put writing was seen at 10,800 followed by 10,900 strike whereas Call writing was seen at 11,000 followed by 11,400 strike. Option band signifies a broader trading range in between 10,700 to 11,000 zones.

“Now Nifty index has to continue to hold above 10,750-10,777 zones to witness an upmove towards 10,925 then crucial hurdle at 10,985 levels,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited told Moneycontrol.

He said it has been taking hurdle at its immediate supply trend line by connecting swing high of 10,985, 10,923 and 10,880 zones and requires a decisive range breakout to commence the next leg of rally.

On the downside, if it fails to hold 10,777-10,750 zones then only we can see a small dips towards 10,650-10,600 zones, he added.

Bank Nifty formed a ‘Bearish Belt Hold’ candle and an Inside Bar on daily scale as it traded in the range of previous session. However it slightly fell down from higher levels but still holding above previous breakout zones of 27,350-27,400 zones. The index closed at 27,528.55, down 191.85 points.

“Now it has to continue to hold above 27,350-27,400 zones to extend its gains towards 27,750 then 28,000 zones while on the downside support exists at 27,150-27,000 zones,” Chandan Taparia said.

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