Technical View: Nifty forms bearish candle, may consolidate as trend looks indecisive

February 13
17:28 2020

The Nifty50 snapped its two-day rally and closed marginally lower on February 13 amid rising Coronavirus cases worldwide and augmented by a further increase in January retail inflation and contraction in December industrial output print.

The index closed below 12,200 levels and formed a bearish candle on daily charts.

Overall it was a volatile session with a negative bias. The rangebound trade is expected to continue in coming session but if it breaks 50-day moving average then there could be further selling pressure, experts feel.

The Nifty50 opened higher at 12,219.55 but was immediately caught in a bear trap and extended selling pressure as the day progressed to hit a day’s low of 12,139.80. The index showed some recovery in last hour of trade and closed 26.50 points lower at 12,174.70.

“Even though Nifty50 registered a bearish candle, it failed to do enough technical damage on price chart to suggest that it has triggered a fresh leg of downswing. Ironically, on a bearish session some of the momentum oscillators on lower time frame charts generated a buy signal,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

Hence, it may remain sideways unless it closes below its 50-day moving average whose value is placed around 12,126 levels, and on such a close, the correction shall initially get extended upto 11,990 levels, he said.

Contrary to this a strong close above 12,231 levels shall initially take the index towards 12,266 and thereafter a slightly bigger target in the zone of 12,350–12,400 can’t be ruled out, he added.

“As trend looks indecisive and technical setup generating mixed signals, traders are advised to remain neutral for time being. However, intraday traders can consider long positions if Nifty sustains above 12,232 levels for more than 30 minutes and look for a target of 12,290,” Mazhar Mohammad said.

India VIX fell further by 1.84 percent to 13.37 levels. Volatility is cooling off from the last two weeks which is supporting bulls and buy on decline strategy in the market.

On the options front, maximum Put open interest was at 12,000 followed by 11,800 strike while maximum Call open interest was at 12,500 followed by 12,400 strike. Put writing was mainly seen at 12,000 and 12,200 strike while minor Call writing was seen at 12,400 then 12,300 strike.

Bank Nifty relatively underperformed the benchmark index and formed a Bearish Engulfing candle on the daily scale. It has taken out the gains of the last two trading sessions and closed near its 50 DEMA, down 0.83 percent at 31,230.30.

“It is finding hurdle near 31,500-31,600 levels while support is seen near 31,100 levels. Now it has to continue to hold above 31,200 to extend its move towards 31,500 then 31,750 levels while on the downside major support exists at 31,000-30,900 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

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