Technical View: Nifty forms bearish belt hold; 11,965 critical hurdle for bulls

June 12
18:29 2019

Nifty, after opening flat, remained in a downtrend throughout the session and closed sharply lower on June 12, dragged by banking and financials and auto stocks.

Lack of domestic triggers, global growth worries and high valuation concerns after recent rally might have pulled stocks down. Industrial output and CPI inflation data scheduled to be announced later in the day might have also played in trader’s mind.

Nifty snapped three-day winning streak as it failed to surpass the immediate barrier of 11,975-12,000 and witnessed selling pressure towards 11,866. It formed a bearish candle that resembles a Bearish Belt Hold formation on daily scale followed by multiple Doji candles that indicates a tug of war in the 11,761-12,000 range.

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.

Nifty after opening flat with a negative bias at 11,962.45, which was also an intraday high, maintained southward journey amid consolidation and hit day’s low of 11,866.35 in the afternoon. The index closed 59.40 points lower at 11,906.20.

India VIX fell 2.54 percent to 14.12. Volatility is hovering below 16, which is supportive for buying interest on any declines but at the same time rules out any major swing in the market, experts said.

“Nifty appears to have resumed its weakness. In the next trading session, if it slips below 11,866 then it can initially head toward its logical target of 11,815,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said though upside remains to be capped around 12,040, until a fresh breakout occurs on intraday charts, 11,965 appears to be a critical hurdle. If bulls manage to get past the said level with a strong push then the rally will expand into 12,000–12,039 zone, Mohammad added.

Considering a lack of clarity on the upsides, Mohammad advised traders to remain neutral on long positions.

In the options market, maximum Put open interest (OI) was at 11,500 followed by 11,800 while maximum Call OI was at 12,500 followed by 12,000.

Significant Put writing was seen at 11,500 followed by 12,000 while Call writing was seen at 12,000 followed by 12,100.

Bank Nifty opened negative and headed towards 30,900. The index closed 299.75 points lower at 30,965.70 and formed a bearish candle on the daily scale.

“The index negated its higher high, higher low formation after three sessions. Now till it holds below 31,313, it could extend its weakness towards 30,600 while on the upside hurdle are seen at 31,313, then 31,500,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

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