Technical View: Nifty forms bearish candle, pull back rally could be seen as index holds crucial support
The Nifty50 after rangebound trade extended losses in last hour of trade and closed in the red for third consecutive session on Tuesday despite strong global cues and sharp rupee appreciation. The selling pressure in technology, banking & financials and FMCG stocks weighed the market.
The index failed to cross previous day’s high and continued its weakness towards 10,824 zones to settle near its 50 DEMA. It formed a bearish candle on daily scale.
As the market managed to hold on to its crucial support of 10,812 levels, there could be possibility of pull back rally in coming session, experts said, adding 10,900 could be next crucial level for further rally.
The Nifty50 after flat opening at 10,879.70 remained rangebound, but suddenly fell sharply in last hour of trade and hit an intraday low of 10,823.80. The index closed at 10,831.40, down 57.40 points, taking total three-day loss to 238 points.
“Nifty50 continued its corrective phase for fourth session in a row but seems to be attracting some support between 10,850–10,800 levels as the pace of fall on the downside is somewhat sluggish in this zone,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said as long as Nifty sustains above its near term support level of 10,812 bulls may attempt a pull back rally but the moment Nifty slips below 10,800 then the pace of fall shall get aggravated further with initial targets close to 10,700 levels.
But ideally if Nifty is making a rangebound move between 11,000–10,600 then the test of lower end of said consolidation zone (10,600) can’t be ruled out, he added.
Mazhar said traders who are on short side will consider booking profits close to 10,700 levels. “Contrary to this any close above 10,900 can be an initial sign of come back for bulls.”
India VIX fell by 0.57 percent to 15.75 levels. VIX needs to cool down further with a hold below 16 zones to get any recovery from support zones.
On option front, maximum Put open interest (OI) was at 10,400 followed by 10,700 and 10,500 strike while maximum Call OI was at 11,000 followed by 11,200 strike.
Put unwinding was at all the immediate strikes from 11,100 to 10,700 strikes while Call writing was at 10,900 to 11,100 strikes.
Experts said option band signifies a lower shift in the trading range in between 10,700 to 11,000 zones.
“Nifty index has been forming lower highs – lower lows from last three trading sessions. It has broken its 50 percent retracement at 10,850 zones and finding hurdle to surpass 10,929 zones. Now it has to cross and hold above 10,850 zones to witness a bounce towards 10,935 then 10,985 while on downside it may find support near to 10,777-10,750 zones,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited said.
Bank Nifty broken its immediate support of 27,150 zones and drifted towards 27,000 zones in last hour of the session. The index closed 217.05 points lower at 27,010.75 and formed a bearish candle on daily scale.
“The index has been forming lower highs – lower lows from past three sessions which suggests selling pressure is intact at higher levels,” Chandan said, adding now if it sustains below 27,350 zones then weakness could drag it towards 26,850 then 26,666 zones while on the upside hurdles at 27,350 then 27,500 zones.