Technical View: Nifty forms a bearish candle; upside likely to be capped at 11,300
Bulls failed to retain control on D-Street as bears made a comeback and pushed the index towards 100-day moving average placed at 11,134 by making a large bearish candle on the charts.
The index resumes its fall after making a bullish candle in the previous trading session. The index witnessed a selling pressure near its 5-day exponential moving average (EMA) and 100-day EMA.
The fall in Indian markets despite a positive trend seen in most Asian markets suggests that bears are here to stay and volatility is likely to continue till the election verdict.
The Nifty50 which opened at 11,271 rose marginally to hit an intraday high of 11,286 before bears took control of D-Street. The index fell to an intraday low of 11,136 before closing the day at 11,157, down 65 points.
Going forward, investors are advised to create short positions only if the index closes below 11,100 while a close above 11,300 could negate the negative sentiment and we could see bulls making their way back into D-Street.
“The Nifty50 registered a strong bearish candle which appears to have dissipated the hopes of a recovery thereby erasing all the gains of May 14 session. Though Nifty sustained above recent swing low of 11,108 in no time the said support can be breached only to test its 200-day moving average whose value is placed around 11,027,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“The upsides for time being shall remain capped around 11,300 and a strong close beyond the said level is required to bring back bulls into the game. In such a scenario the strength can get extended towards 11,450,” he said.
Mohammad advises traders to remain neutral on the long sides whereas intraday trade can be initiated on the short side on breach of 11,100 and look for a modest target of 11,020 with a stop above day’s high i.e. 11,286.
India VIX moved up by 5.63 percent at 28.65. However, higher VIX suggests that volatile swings could continue in the market ahead of Election polls and outcome.
On the options front maximum Put OI is placed at 11,000 followed by 11,500 while maximum Call OI is placed at 12,000 followed by 12,500.
Call writing is seen at 11,300 followed by 11,500 strikes while Put writing is seen at 11,000. Options band signifies a shift in a lower trading range in between 11,000 to 11,500.
“The Nifty50 index failed to surpass the previous day’s high as follow up buying was missing at higher levels and it witnessed selling pressure in the last hour of the trading session,” Chandan Taparia, derivative & technical analyst at Motilal Oswal Securities told Moneycontrol.
“It failed to hold its gains and selling pressure is visible on every small bounce in the market. It formed a bearish candle on the daily scale and now till it holds below 11,250 it could extend its weakness towards 11,118 and then at 11,000 while on the upside hurdle is seen at 11,250 then 11,333,” he said.