Technical View: Nifty forms bearish candle; 11,990 crucial for further downside

February 10
18:28 2020

Nifty50 remained in the negative terrain for the second consecutive session on February 10 as fast-spreading China’s coronavirus raised fears over global growth.

The index managed to defend 12,000-mark, but closed below 50-day exponential moving average (which placed around 12,054) and formed a bearish candle on daily charts as closing was far lower than the opening price.

After a consistent fall since the start of February, the volatility increased a bit today. India VIX moved up by 3.35 percent to 14.21 levels.

Experts expect the consolidation to continue and feel the 11,990 (today’s intraday low) could be an important level for direction on either side in the coming session.

The Nifty50 after opening flat at 12,102.35 fell sharply as the day progressed and hit an intraday low of 11,990.75 in the morning itself, followed by a bit of recovery in late trade. The index closed 66.90 points down at 12,031.50.

“As per the recent observations, as long as it sustains below the middle Bollinger band it should eventually head towards lower Bollinger band whose value is present around 11,741. Interestingly the said value falls around the bullish gap zone of 11,783–11,749 levels registered on February 4,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said as the twin momentum oscillators also generated a sell signal, Nifty shall once again come under selling pressure if trades below 11,990 levels for at least 30 minutes tomorrow.

In such a scenario breach of 11,950 looks inevitable which shall then facilitate the downside target placed in the zone of 11,783–11,749 levels, he added.

“Contrary to this some sideways consolidation can be expected if Nifty manages to close above 12,100 levels. Therefore positional traders are advised to create fresh shorts on breach of 11,950 levels on a closing basis and look for a target of 11,770,” Mazhar Mohammad said.

On the options front, maximum Put open interest was seen at 12,000 followed by 11,500 strike while maximum Call open interest was at 12,500 followed by 12,200 strike.

Put writing was seen at 12,000 then 11,700 strike while Call writing was seen at 12,000 followed by 12,200 strike.

Bank Nifty witnessed selling pressure from the initial trades and corrected below 31,000 mark intraday. It negated its higher lows formation after four trading sessions and formed a bearish candle on a daily chart. The index closed at 31,058.20, down 0.46 percent.

“At the current juncture, it is sustaining above the Falling Channel breakout level and 50 DEMA. Supports remain intact at 31,000–30,800 zone and sustenance above the support zone may lead to an extension in the ongoing move towards 31,500 then 31,750 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.Exclusive offer: Use code “BUDGET2020” and get Moneycontrol Pro’s Subscription for as little as Rs 333/- for the first year.

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