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Technical View: Nifty forms bearish candle, 12,087 crucial for pre-budget move

January 27
18:29 2020

The Nifty opened sharply lower and extended the selling pressure as the day progressed to close more than a percent down following a correction in global markets, as traders worried about the impact of China’s coronavirus outbreak on the global economy.

All sectoral indices, barring pharma, closed in the red, with Nifty Metal falling the most (down 3 percent) followed by Bank and FMCG, which ended more than 1 percent lower.

The Nifty extended losses and formed a bearish candle on daily charts, as the closing was lower than the opening price, after forming a Bearish Engulfing candle on the weekly scale last week. However, it is hovering near its crucial 50-DEMA, which is acting as support for the past few sessions.

Experts feel a major selling pressure is unlikely and the index could remain in the 12,100-12,500 range ahead of the Union Budget to be presented on February 1.

After opening lower at 12,197.10, the Nifty continued on the downward spiral and hit an intraday low of 12,107 in late trade. The index closed at 12,119, down 129.30 points, or 1.06 percent.

“In line with the global cues, the Nifty50 remained under selling pressure and registered a strong bearish candle before signing off the session. Though medium-term charts are slightly tilting in favour of bears, with last week’s sell-off, it will be too early to conclude that the Nifty has resumed its downtrend with a lower top at last Friday’s high of 12,227 levels which will be confirmed only with a close below 12,087, which is not only a recent corrective swing low but also the value of its 50-day EMA (12,088), “Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

If the January 27 fall is just a reaction to global cues, then the Nifty shall remain stable in the next session and make an attempt to consolidate between 12,087 and 12,227 and strength in the index shall not be expected unless it closes above 12,227, he said.

Considering the uncertainty in global markets, Mohammad advised traders to remain neutral and consider a short-side trade on a close below 12,087 and look for a target of 11,900.

The India VIX moved up by 10.38 percent to 17.17 levels. Experts say the volatility will stay higher ahead of the Budget.

If the Nifty fails to go past the 12,150-12,200 zone, then it could drift towards the next major support of 12,050-12,000. On the upside, the hurdle is seen at 12,200 then 12,250.

The options data indicated a shift in the trading range for the Nifty to 12,000-12,300.

Maximum Put open interest was seen at 12,000 followed by 11,500 strike, while maximum Call open interest was seen at 12,200 followed by 12,300 strike. Put unwinding was seen at all the immediate strikes while marginal Put writing was seen at 11,900 strike whereas meaningful Call writing was seen at 12,200 followed by 12,150 strike.

The Bank Nifty opened negative and extended weakness towards 30,800. It closed 1.29 percent lower at 30,837.40 and formed a bearish candle on the daily scale, as it wiped out most of the gains of the previous two sessions.

“The Bank Nifty closed near its crucial supports of 30,800 levels and needs to hold above the same to witness a bounce towards 31,250 levels, else below the same it could drag it towards its next support of 30,500 and even lower levels,” Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services, said.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.

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