Technical View: Nifty end below 14,700; India VIX rises 15%

Market Outlook

Nifty50 reclaimed 15,000 in intraday trade but failed to hold onto gains as bears took control of the D-Street, pushing the index below crucial support levels on February 22.

The index, which made a Bearish Belt Hold pattern on Monday, closed in the red for the fifth consecutive day in a row.

Supertrend indicators triggered a sell signal on the daily Nifty charts while moving average convergence divergence (MACD) gave a bearish crossover on Friday. A bearish trend on both indicators suggests that weakness is likely to continue in the short-term.

Nifty50 which opened slightly higher failed to hold on to gains and quickly turned negative. During the course of the day, bears further tightened their grip, pushing the index below the crucial support of 14,700-14,750 levels. The index closed below 5, 13, 20-Days Exponential Moving Averages (EMA).

The Nifty50, which fell by over 2 percent not only retraced 38 percent of its last leg of the rally from the lows of 13,596 levels but also closed below the 20-Day Moving Average. The index could get some support near 14,600 levels.

“If the Nifty has to bounce back, it might only come after testing the said average. In case if bulls fail to defend 14,600 levels, the index may slide all the way down to test its 50-Day Exponential Moving Average around 14,300 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“Interestingly, the value of this average is placed near the post-Budget day bullish gap zone of 14,469 – 336 levels. Therefore, if Nifty doesn’t stabilise around 14,600 levels then it shall slide down into the said gap zone for stability,” he said.

Mohammad further added that for the time being, short-term traders are advised to consider fresh shorting only on close below 14,600 levels.

India VIX moved up sharply by 14.47% from 22.25 to 25.47. A sudden spike in VIX along with sustained selling pressure has caused the fear and worry of further profit-booking.

On the options front, the maximum Put OI is placed at 14,000 followed by 14,500 strikes while maximum Call OI is placed at 15,000 followed by 16,000 strikes.

“We witnessed Put writing at 14,700 while significant unwinding was seen at 15,000 strikes. Call writing was seen 15,000 then 14,900 strikes. Options data suggests a wider trading range in between 14,300 to 15,200 zones while an immediate range between 14,500 to 15,000 zones,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited told Moneycontrol.

“Nifty formed a Bearish Belt Hold candle on the daily scale as it remained in bears’ grip and continues its formation of lower highs – lower lows of the last four trading sessions,” said Taparia.

He further added that as long as Nifty50 remains below 148,00 zones, weakness could continue towards the next key support of 14,500 and 14,400 zones, while on the upside hurdles are seen at 15,000 and 15,150 zones.

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