Technical View: Nifty forms #39;Bearish Belt Hold#39; pattern, 10,812 crucial for bulls
The Nifty50 extended downtrend for third consecutive session and closed below 10,900 levels, dragged by oil & gas, select banking & financials and auto stocks. Mixed global cues and not so encouraging December quarter earnings along with fear of downgrade dented the market sentiment.
Traders also looked cautious ahead of macro data – January CPI inflation and December industrial output scheduled to be announced on Tuesday evening.
The index formed a small bearish candle, which resembles a ‘Bearish Belt Hold’ kind of formation on the daily charts.
A 10,812 is expected to be crucial level for the Nifty, experts said, adding if it breaks the same then there could be further selling pressure which could take the index to around 10,700 levels.
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 Nifty50 after opening lower at 10,930.90, which was also a day’s high, extended losses to hit an intraday low of 10,857.10 and remained under pressure amid volatility. The index closed 54.80 points lower at 10,888.80.
“Nifty50 signed off the session with a small Bearish candle, which resembles a Bearish Belt Hold formation as it continued to slide without any respite from the opening tick which also remained as the highest point of the day,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said in the near term it looks critical for the index to sustain above 10,812 kind of levels to prevent further damage.
“In case if the slide continues below 10,812 levels then next target appears to be placed around 10,714 levels where it is expected to test its 100-day moving average where this index can attract some buying interest,” he added.
According to Mazhar, as of now some strength in Nifty can be expected above 10,930 levels but in order to get back in the game bulls need a close above 11,041 levels.
In the futures & options segment, maximum open interest in Call option was seen at 11,000 strike, followed by 11,200 and 11,100 strikes while maximum Put option was seen at 10,400 strike followed by 10,700 and 11,000 strikes.
Call writing was seen at the strike price of 10,900 followed by 11,100 levels while Put writing was seen at the strike price of 10,600 followed by 10,500 strike.