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Technical View: Nifty forms bearish candle for 3rd day, avoid long positions

February 17
17:28 2020

The Nifty fell for a third consecutive session to trade below its 50-day moving average on February 17 after Moody’s cut FY20 GDP growth forecast to 5.4 percent from 6.6 percent. Concerns over banks’ exposure to the telecom sector facing huge AGR dues and continuous rise in coronavirus cases added to the gloom.

The index closed below 12,050 and formed a bearish candle for the third straight session, as the closing was lower than the opening value.

Considering the consistent weakness after the recent rally, experts advised traders to avoid long positions.

India VIX crossed the 14-mark for the first time in five consecutive sessions, rising 5.84 percent to 14.41 level.

After opening higher at 12,131.80, the Nifty hit an intraday high of 12,159.60 in the early trade. It, however, failed to hold on to the gains and slipped into the red to trade lower for the remaining session. It hit the day’s low of 12,037 in late trade and closed 67.70 points down at 12,045.80.

“In line with the evolving chart patterns, the Nifty50 rightly opened the week on a negative note as it registered a bearish candle before signing off the session. If last seven sessions of price behaviour is a corrective reaction to the swift rally witnessed from the lows of 11,614–12,116 levels, then the Nifty shall ideally end this corrective structure, which appears to be unfolding in the form of an expanded flat in Elliot wave parlance, after dipping below 11,990 levels,” Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

The Nifty was decisively trading below its 50-day moving average and if it slips into some sort of multi-week downtrend, then corrective swing would get extended into the 11,783–11,749 zone, he said.

“For the time being, strength in the index shall not be expected unless it closes above 12,201 levels,” he added. He advised traders to avoid long positions and look for some signs of stability around 11,990 whereas existing shorts should be squared off if the Nifty fails to close below 11,990 in the next trading session.

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 12,300 strike.

Call writing was mainly seen at 12,100 followed by 12,300 strike while Put unwinding was seen at immediate strike with minor Put writing at 12,050 strike. This options data indicated an immediate trading range for the Nifty around 12,000-12,300 levels.

The Bank Nifty continued its corrective move for the third consecutive session and corrected by more than 1,000 points from its recent swing high of 31,649. It formed a bearish candle on the daily chart and closed below its previous week’s low, down 0.5 percent at 30,680.70.

“The banking index is currently hovering around its support of the 50 percent retracement level of the recent upmove from 29,612 to 31,649, which is placed at 30,631. If it manages to hold above 30,500, then we may witness an upmove towards 31,200 then 31,500 levels. On the flip side, major support below 30,500-mark is placed at 30,200 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.

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