Technical View: Nifty forms long black day pattern; 10,718 crucial
Nifty extended the losses as the day progressed taking the index to new corrective swing low on August 22 after CEA dashed hopes for stimulus measures. A weakness in the rupee against the US dollar also did not help.
The index closed below 10,800 and formed Long White Day pattern on daily charts, which indicated that bears have a tight grip on the market. The index ended down 177.30 points or 1.62 percent at 10,741.40.
Experts feel if the index fails to hold its new corrective swing low of 10,718 in coming sessions, then there could be major selling pressure and it could even fall below 10,600.
“Nifty appears to have registered a fresh breakdown as it decisively breached its near term supports. Based on our wave counts, the correction from the recent highs of 11,147 appaers to be the last leg of corrective structure, which is in progress from June highs of 12,103, with logical targets present around 10,668. Besides, on long term charts strong support for Nifty is placed in the zone of 10,582–10,524,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said in next trading session if Nifty slips below 10,718 then it can head further down towards the zone of 10,600–10,524 where it should ideally bottom before witnessing any meaning full pullback rally. Meanwhile, upsides may remain capped around 10,910, he added.
Mazhar Mohammad advised as the market is approaching critical support levels, short sellers should remain cautious and should give preference to book profits rather than creating fresh positional shorts.
However, if Nifty trades below 10,700 for at least 30 minutes then intraday shorting can be considered for modest targets placed around 10,600 with a stop above intraday high, according to him.
India VIX moved up further by 4.89 percent to 17.84.
On the options front, maximum Put open interest is at 10,700 followed by 10,500 strike while maximum Call OI is at 11,000 followed by 11,100 strike.
Meaningful Call writing is at 11,000 followed by 10,800 strike while minor Put writing is at 10,700 then 10,500 strike.
Options data suggests that there was a shift in lower trading range for the Nifty to 10,650-10,950 from 10,750-11,100 earlier.
Bank Nifty opened negative and fell 670.05 points to close at 27,049. It is forming lower highs – lower lows from past three trading sessions. On August 22, it formed a bearish candle on the daily scale as sustained selling pressure was seen at higher zones.
“The index has broken down from its consolidation band after eleven trading sessions and now till it holds below 27,250, weakness could be seen towards 26,750 then 26,500 while on the upside hurdle is seen at 27,500 then 27,750,” 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.