Technical View | Nifty forms bearish candle, 17,300 becomes make or break point for further move


The Nifty50 had a steep gap down opening amid rising expectations for sooner Fed rate hike after inflation jumped to 40-year high, and finally settled with more than a percent loss on February 11, weighed by selling pressure across sectors.

The index snapped three-day winning streak and formed bearish candle on the daily charts followed by Hanging Man pattern formation, as the closing was lower than opening levels. During the week, the index corrected 0.8 percent and saw a small bearish candle formation on the weekly scale. Experts feel 17,300, almost near day’s low, is going to be crucial level for either side of direction in coming days.

India VIX, which measures the expected volatility in the market, also spiked to nearly 19 levels, at 18.68, up 5.5 percent over previous close, which experts feel needs to cool down for stability in the market.

Also read – Taking Stock | Market snaps 3-day gains; Nifty ends below 17,400, Sensex falls 773 points

The Nifty50 opened lower at 17,451 and corrected up to 17,303 levels before closed the session at 17,374.80, down 231 points or 1.31 percent.

“Bearish candle as a follow-through to the Hanging Man of the preceding session shall not augur well for the bulls as Nifty has given up almost all the gains of the last two trading sessions registered with a gap up. In this process, it also filled the bullish gap placed in the zone of 17,339 – 17,306 levels,” said Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

Going forward, he feels the index needs to sustain above 17,300 levels to retain positive bias as a close below 17,300 levels can drag down the index towards 17,000 levels.

Also read – Gainers & Losers: 5 stocks that moved the most on February 11

However, a close examination of Nifty’s behaviour is hinting that the price action is unfolding in a triangular formation that is nearing its end; therefore going forward a swift move can be expected in either way depending on the direction of the breakout, he said.

For time being, Mazhar Mohammad advised traders to avoid long side bets and intraday traders to create short positions below 17,300 levels with a target close to 17,100 levels.

On option front, maximum Call open interest was seen at 18000 strike then 17500 strike while maximum Put open interest was seen at 16500 strike then 16000 strike. Marginal Call writing was witnessed at 17600 then 17800 strike while Put writing was seen at 17600 then 17400 strike.

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Option data clearly indicated that in an immediate term, the index could trade within a range of 17,200 to 17,600 levels.

Bank Nifty opened gap down at 38,567.65 and fell up to around 38,400 levels. However, it witnessed a pullback move near 38,800 but bounces were again being sold. The index formed a Doji sort of candle on daily scale and closed with losses of 493.60 points or 1.27 percent at 38,517.

The index also witnessed Doji kind of pattern formation on the weekly scale and has been moving in a range, falling 0.7 percent for the week. “It has to hold above 38,500 levels, to witness an up move towards 38,850 and 39,000, whereas support is seen at 38,250 and 38,000 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On stocks front, he said bullish setup was seen in Aurobindo Pharma, Petronet LNG, IOC, InterGlobe Aviation, IndusInd Bank, HPCL, NTPC and ITC while weakness was seen in Info Edge, Metropolis Healthcare, Coforge, L&T Infotech, Dr Lal PathLabs, Motherson Sumi, Tata Chemicals, Manappuram Finance, SRF, Indiabulls Housing, Balkrishna Industries, Havells, Deepak Nitrite, DLF, Grasim, Jubilant Foodworks, RBL Bank, Godrej Consumer Products, Tech Mahindra and City Union Bank.

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