Technical View: Nifty forms bearish candle on FO expiry day, experts say avoid long positions


The Nifty50 traded sharply lower for the second day, ending the last day of the March series with 1.5 percent losses as selling was seen across sectors on March 25.

The index formed a bearish candle on the daily charts as the closing was lower than opening levels. Experts say 14,000 is expected to act as a crucial support level.

After opening a tad higher at 14,570.90, the Nifty immediately slipped in the red to hit the day’s low of 14,264.40. The index ended 224.50 points, or 1.54 percent, at 14,324.90.

Traders should avoid long positions for the time and intraday traders should consider shorting below 14,264 levels for a target placed in the 14,150–14,100 zone, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.

The Nifty50 seems to have registered a fresh breakdown, as it not only closed below the recent corrective swing low of 14,350 levels but also broke the 27-day old descending channel which was in progress from the life-time highs of 15,431 levels, Mohammad said.

With the intraday low of 14,264, the index also bridged the post-budget day bullish gap in the zone of 14,336–14,469, which ideally is supposed to act as a support level, he said.

Unless the index stabilises around these levels with a close above 14,575 in the next one or two trading sessions, a  further slide can’t be ruled out as hinted by the breakdown of descending channel, which has opened up a bigger target of 13,570 levels, Mohammad said.

In the next session, if the Nifty trades below 14,264, then the corrective downswing shall initially head towards 14,000–13,950.

In the past, an 18-day corrective downswing in September 2020 also halted after hitting the 100-day exponential moving average, whose value is currently placed at around 14,000, he said. On the downside, the support zone of 14,000–13,950 could be critical for the bulls.

India VIX was up by 1.06 percent from 22.45 to 22.69 levels. Since it is the beginning of new series, the options data is scattered at different strikes.

On the options front, maximum Put open interest was seen at 14,000 followed by 13,500 strike, while maximum Call open interest was seen at 15,000 followed by 16,000 strike. Options data indicated that an immediate trading range for the index could be 14,000-14,800 for the coming sessions.

The Bank Nifty opened positive at 33,420.75 but failed to hold above 33,500 and drifted lower to hit the day’s low of 32,415.25. However, it witnessed a good short-covering bounce but the bears pushed it back towards 33,000. It closed with losses of 286.90 points at 33,006.40 and formed a bearish candle on the daily scale.

“Now till the Bank Nifty remains below 33,500, weakness could continue towards 32,500 and 32,000, while on the upside, hurdles are seen at 33,500 and 34,000,” Chandan Taparia, Vice President | Retail-Research at Motilal Oswal Financial Services said.

On the stocks front, a bullish setup was seen in SAIL, Tata Steel, Jindal Steel, ICICI Bank, Max Financial Services and Dr Reddy’s Labs, while weakness was seen in Zee Entertainment, PNB, Escorts, IOC, Indiabulls Housing Finance, Maruti Suzuki, Glenmark Pharma, Manappuram Finance, Coal India, Sun TV, Bharti Airtel, Voltas, Indus Towers, Hero MotoCorp, PVR, Reliance Industries, RBL Bank and Bajaj Finance, he added.

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