Technical View: Nifty forms Long Black Day candle, experts say traders can create fresh shorts


The Nifty50 remained under heavy selling pressure through the day and closed 3.5 percent lower on April 12 as record COVID-19 cases and the economic cost of a possible lockdown in states like Maharashtra weighed heavy on the market.

After opening gap down at 14,644.65, the index extended selling pressure as the day progressed to hit the day’s low of 14,263.55. The index plunged 524.10 points or 3.53 percent to 14,310.80.

The index made a Long Black Day candle on the daily charts as the closing was much lower than the opening level. The selling pressure can be extended if the index breaches 14,250 and in that case, 14,000 can be easily broken, experts have said.

India VIX rose sharply by 16.25 percent from 19.78 to 22.99 levels. The spike in volatility from lower zones has made it tough for the bulls to hold their key levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

The Bulls were battered as weakness crept into the weekly charts, thereby signalling the resumption of a downtrend, in progress from the highs of 15,431 registered on February 16, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.

“In this process, the Nifty not only breached the recent corrective swing low of 14,264 levels but also tested its 100-day simple moving average, whose value is placed around 14,250 levels at an intraday low of 14,248 levels,” Mohammad said.

In the next trading session, if the index sustains above 14,248 levels, then it can make an attempt to bounce back, he said. Considering the magnitude and the pace of fall, the bounce would remain vulnerable to a selloff and a breach of 14,248 could extend the weakness towards 13,963 levels, Mohammad said.

Upsides shall remain capped at around 14,652 and strength shall not be expected unless the hurdle is cleared on a closing basis, he said.

Traders should create fresh shorts either by making use of the rally or on breach of 14,248 and look for initial targets placed at around 13,960.

On the options front, maximum Put open interest was seen at 14,000 followed by 14,500 strike, while maximum Call open interest was seen at 15,000 followed by 15,500 strike. Call writing was seen at 14,500 then 15,000 strike, while minor Put writing was seen at 14,300 and 14,400 strike. The data indicates that the Nifty50 could see a wider trading range between 14,000 and 14,800 in the coming sessions.

The Bank Nifty opened gap down at 31,637.90 and drifted lower to hit the day’s low of 30,520.30, underperforming the broader market. It ended the day 1,656.05 points, or 5.10 percent, lower at 30,792.

The index formed a bearish candle on the daily scale, indicating selling pressure at higher zones. “Now till the index remains below 31,500 levels, weakness could continue for the downside move towards 30,500 and 30,000 while on the upside hurdles are seen at 31,750 and 32,000 levels,” Taparia said.

On the stock front, a bullish setup was seen in Dr Reddy’s Labs, Cipla, Divis Labs and Asian Paints, while weakness was seen in BHEL, Indiabulls Housing Finance, Zee Entertainment, M&M Financial, RBL Bank, PNB, Canara Bank, L&T Finance Holdings, Piramal Enterprises, Apollo Tyres, IndusInd Bank, Cholamandalam Investment, LIC Housing Finance, Federal Bank, Vedanta, Bajaj Finance, Havells, SBI, Bata and Cummins India, he added.