Technical View: Nifty forms Long Black Day pattern; 10,782 remains crucial support
The Nifty50 remained weak for the majority of the session and closed sharply lower, though a 10 percent rally by index heavyweight Reliance Industries cut down losses to some extent on August 13.
Weak global cues amid political uncertainty in Italy, Hong Kong and Argentina, along with domestic slowdown worries dented sentiment. Selling was seen across sectors with Nifty Bank, Auto, FMCG and IT, each falling 2-4 percent.
The index closed way below 11,000 level and formed bearish candle which resembles a Long Black Day kind of formation on daily charts, indicating bears still have an upper hand on the Dalal Street and 10,782 will remain crucial level to watch out for, experts feel.
The Nifty50 opened higher at 11,139.40 and hit a high of 11,145.90 amid volatility. The index finally caught in bear trap in late morning deals and extended selling pressure in afternoon to hit a day’s low of 10,901.60. It closed 183.80 points or 1.65 percent lower at 10,925.90.
“Nifty50 appears to have resumed its downtrend as it registered a Long Black Day formation with a massive fall of around 200 points. The pace of fall is really worrying some and hence if this index doesn’t stabilize in the next trading session with a positive close then the threat of breaching recent lows of 10,782 shall be much higher,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said Nifty may have avoided a much bigger catastrophe as an extraordinary rally in Reliance Industries came to the rescue of the index by contributing around 75 points positively to Nifty with a rally of around 10 percent.
He feels for time being upsides shall remain capped around 11,182 level and unless Nifty closes above 11,146, strength should not be expected.
On the downsides 10,782 remains critical as a breach of this support shall drag down the indices further into the crucial support zone of 10,576–10,512 on long term charts, Mazhar Mohammad said.
On the Options front, maximum Put open interest is at 11,000 followed by 10,700 strike while maximum Call open interest is at 11,000 followed by 11,500 strike.
Call writing is at 11,000 followed by 11,200 strike while Put unwinding is at all the immediate strikes with minor Put writing at 10,600 strike.
The Option data suggests trading range for Nifty is between 10,700 to 11,200 zones.
Maximum Call OI and Put OI in the monthly contract is at 11,000 strike, which suggests a tug of war and a strong fight between Option writers, Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
India VIX moved up by 12.23 percent to 17.77 level. A sharp jump in volatility index has wiped out the hope of a decent bounce back as bears are again back to ride their move.
Bank Nifty opened negative and remained under pressure throughout the session as it wiped out the gains of the previous two trading days. The index closed 702.80 points lower at 27,729.10 and formed a bearish candle on the daily scale.
“It is facing hurdle at higher zones and now till it holds below 28,000 level it could drift towards 27,500 then 27,350 zones while on the upside resistance is seen at 28,350-28,500 zones,” Chandan Taparia said.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.