Technical View: Nifty forms bearish candle; short if index breaks 10,900
Nifty after opening flat started drifting lower gradually as the day progressed and closed near day’s low on August 21 despite strong European cues, dragged by selling across sectors.
Nifty after opening flat at 11,018.15 immediately turned lower and gradually extended fall as the day progressed to hit an intraday low of 10,906.65. The index closed 98.30 points lower at 10,918.70. India VIX moved up 2.36 percent to 17.02.
The falling near the lower end of the range indicates the market is in bears’ control, and rising volatility is giving putting sustained pressure at every bounce, hence, there could be more sell-off if index dips decisively below 10,900 in the coming sessions, experts feel.
Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in said to prevent this kind of damage, bulls need to defend 10,900, which will also extend the rangebound move between 11,150–10,900 for some more time.
However, strength in the index shall not be expected unless it gets past 11,120 on a closing basis, he added.
Mazhar Mohammad said, for time being, it looks prudent on the part of traders to avoid long side bets whereas shorting can be considered if Nifty trades below 10,900 for at least 30 minutes in next session with a stop above intraday high for the initial target of 10,790.
On the options front, maximum Put open interest is at 11,000 followed by 10,800 strike while maximum Call OI is at 11,000 followed by 11,500 strike.
Call writing is at 11,000 followed by 11,100 strike while minor Put writing is at 10,600 then 10,500 strike.
Options data suggests a shift in the lower trading range i.e. 10,750-11,100.
Bank Nifty has formed lower highs-lower lows pattern from the last two trading sessions. It fell from 28,500 to 27,700. The index closed at 27,719.05, down 263.40 points.
The index formed a bearish candle on the daily scale and has been finding sustained selling pressure at higher levels.
“If it holds below 27,700 then it may drift towards 27,500, then 27,350 while on the upside hurdle is seen at 28,000, then 28,350,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services 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.