Technical View | Nifty forms bearish candle, needs to sustain above 16,825 for stability


The Nifty’s bid to recoup the previous day’s losses was thwarted by a last-hour selloff as Russia intensified attacks on Ukraine and the index ended April 19 below the psychologically vital 17,000-mark, the fifth day it closed in the red.

The Nifty started off the day higher at 17,259 after four days of correction and climbed to 17,276 but a last-hour selloff pulled the index down to the day’s low of 16,825. The index closed at 16,959, down 215 points, or 1.25 percent.

All sectoral indices, barring oil & gas, ended lower, with IT and FMCG falling around 3 percent each.

The index has formed a bearish candle on the daily charts as the closing was lower than the opening levels.

The index broke the 200-day simple moving average (17,170) and the psychologically vital 17,000-mark but defended the 200-day exponential moving average (16,840) by showing a 134 points recovery from the day’s low of 16,825, which experts feel henceforth could be a crucial level for further downside.

An increase in volatility also caused some discomfort as India VIX, the fear index, rose by 2.27 percent to 19.78 levels.

“A late sell-off from around 17,230 levels seems to have tilted the tide decisively in the favour of the bears. In this process, the Nifty breached its critical supports to settle below the 200-day moving average,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

At an intraday low of 16,824, the index tested the 200-day exponential moving average and bounced back. Hence, “going forward, it remains critical for the index to sustain above 16,820 as a breach of this can drag it down further towards 16,500 levels,” said Mohammad.

As the trend seems to be on the downside, it would be prudent to remain neutral on the long side bets till some signs of stability are visible, he said.

As per the options data, the trading range for Nifty has shifted lower to 16,600-17,350 against 16,800-17,500 levels.

On the options front, there was a maximum Call open interest at 18,000 strike followed by 17,500 strike, while maximum Put open interest was seen at 17,000 strike followed by 16,500 strike. Marginal Call writing was seen at 17,200 strike then 17,300 strike, while Put writing was seen at 17,000 strike then 16,700 strike.

Banking index

The Bank Nifty opened positive at 36,807 and gained further to hit the day’s high of 37,124 but failed to hold on to those gains amid last hour sell-off and touched the day’s low of 35,926.

The index formed a bearish candle and closed 387 points lower at 36,342.

“Till it holds below 36,500 zones, weakness can be seen towards 36,000 and 35,500 levels, whereas hurdles are placed at 36,750 and 37,000 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

The broader markets were also caught in the bear trap as the Nifty midcap 100 index fell 1.4 percent and smallcap 100 index declined 1.66 percent.

On the stock front, Taparia said positive setup was seen in Coal India, Reliance Industries, AU Small Finance Bank and IOC.

Weakness was seen in Mindtree, L&T Infotech, HDFC, Strides Pharma Science, Tata Power, ACC, RBL Bank, HDFC Life, Max Financial Services, Shriram Transport Finance, HDFC AMC, Motherson Sumi Systems, SRF, Indiabulls Housing Finance, Nippon Life India Asset Management, MCX, United Spirits, Tech Mahindra, Deepak Nitrite, HCL Technologies, ITC, Alembic Pharma, Dixon Technologies, L&T Technology Services, Tata Motors, Infosys, Colgate Palmolive, IRCTC, Aurobindo Pharma and Kotak Mahindra Bank, he added.

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