Technical View | Nifty forms bearish candle as it faces selling pressure near 200-SMA, 17K remains crucial

The Nifty50 opened higher at 16,900-mark and hit a day's high of 16,928.

The Nifty50 opened higher at 16,900-mark and hit a day’s high of 16,928.

The Nifty50 witnessed a sharp correction for the first time in the last six consecutive sessions and lost more than 200 points on March 15, weighed by weak global cues and rising fresh COVID cases in Europe & China. The index had gained more than 6 percent over the past five sessions.

The index faced significant selling pressure near its 200-day simple moving average placed at 16,980 and formed a bearish candle on the daily charts. As long as it holds critical support placed around 16,430, a 10-day simple moving average as well as around bullish gap zone registered on March 10, the trend may not favour bears, while 17,000 is going to be crucial level for further strength in the index, experts feel.

The volatility inched up again, closing higher by 4 percent to 26.73 levels which still favours bears. Experts consistently say unless it falls around 20 levels, the stability is unlikely to be seen in the market.

The Nifty50 opened higher at 16,900-mark and hit a day’s high of 16,928. The index remained above 16,800 levels in the morning, but was caught in a bear grip in afternoon and corrected up to 16,555 levels before closing 208 points or 1.2 percent down at 16,663.

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“Bulls were disappointed as they encountered selling pressure after moving close to the 200 days simple moving average whose value is placed around 16,980 levels. Moreover, with this vicious fall, Nifty erased all the gains witnessed in Monday’s trading session,” says Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

He feels critical support seems to be in the bullish gap zone of 16,447 – 16,418 levels, registered on March 10 and unless Nifty closes below 16,418 levels the trend may not favour bears.

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However, strength should not be expected unless Nifty closes above 17,000 levels, he says. “On such a close bigger and sustainable up move can be expected with initial targets present in the zone of 17,450 – 17,500 levels.

For the time being, Mazhar Mohammad advised that it looks prudent to remain neutral for the day. “But intraday traders with high risk-taking ability can short below 16,555 levels and look for a modest target of 16,450 by placing a stop-loss above intraday high,” he says.

On option front, there was a maximum Call open interest at 18,000 strike followed by 17,000 strike while maximum Put open interest was seen at 16,000 strike followed by 16,500 strike.

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Call writing was seen at 17,000 strike, then 16,800 strike while marginal Put writing was witnessed at 15,700 strike then 15,500 strike. The option data indicated that the Nifty could trade in a range of 16,350 to 17,000 levels in the coming sessions.

Bank Nifty started off day higher at 35,468 and remained resilient in the absence of follow-up buying activities. It moved in line with the pressure of the broader markets but relatively outperformed. The index formed a bearish candle on daily charts as it closed with a 290-point loss at 35,023.

“It has to hold above 35,000 mark to see an up move towards 35,250 and 35,500 levels, however support can be seen at 34,750 and 34,500 levels,” says Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

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On stocks’ front, he says there was a positive setup in Tata Consumer Products, Dabur India, Berger Paints, Polycab India, SRF, Navin Fluorine International, Cipla, Voltas, UPL and Maruti Suzuki.

However, weakness was seen in Mindtree, Coforge, NMDC, Tata Steel, Hindalco, Vedanta, SAIL, ICICI Lombard General Insurance Company, Coal India, RBL Bank, Tech Mahindra, Info Edge, HPCL, BHEL and HDFC Life, he adds.

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