Technical View | Nifty forms bearish candle on FO expiry day, 17,350 remains crucial for downside


The Nifty50 was looking to extend gains above the 17,700 mark on August 25, but the selling pressure in late trade amid increasing volatility wiped out all those gains and it closed with half a percent loss on the monthly F&O expiry day. The correction was despite positive global cues ahead of the Jackson Hole meeting.

The index has seen a formation of bearish candlestick pattern, which somewhat resembles Bearish Engulfing kind of pattern but the trend needs to be watched out for in coming sessions to confirm the strength of bears, said experts. As far as the levels are concerned, 17,499 (the previous day’s low) is expected to be immediate support, followed by 17,350 which if it breaks, can bring more weakness at Dalal Street, they said.

The broader markets have seen a bit of outperformance over frontliners as the Nifty Midcap 100 index ended flat and Smallcap 100 index rose half a percent on positive breadth. About 1,044 shares advanced against 926 declining shares on the NSE.

The Nifty50 opened higher at 17,679 and climbed up to 17,726, but the weakness in late trade pulled down the index below 17,500 mark. The index finally settled with 82 points loss at 17,522.

Also read – Taking Stock | After a late sell-off, Nifty ends around 17,500, Sensex falls 310 pts on expiry day

“Expiry day’s price behaviour is looking like one akin to the resumption of a downtrend from the intraday highs of 17,726 levels. Hence, in the next trading session, if the Nifty, slips below 17,499 levels then the weakness shall initially extend towards 17,345 which also results in the breach of the 20-day SMA (around 17,480) which offered support to the index,” said Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

It also confirms more weakness with higher targets present around 16,980 levels.

Therefore, for the time being long side traders should adopt a neutral stance whereas intraday shorting can be considered below 17,490 for a modest target of 17,390 levels, the market expert advised.

The volatility again inched back above 20 levels during the day, making the trend more favourable for bears. The market stability is unlikely unless the volatility drops below 18 levels, experts said. India VIX, the fear index, rose by 6.18 percent to 19.57 levels.

Since it’s the beginning of the new series, Option data was scattered at various far strikes. We have seen maximum Call open interest at 18,000 strike followed by 18,500 strike while there was maximum Put open interest at 17,500 strike then 17,000 strike.

Also read– Sensex, Nifty erase gains to end in the red: Factors that led to the move

Marginal Call writing was seen at 17,600 strike followed by 18,000 strike while Put writing was seen at 17,500 strike then 17,400 strike. Hence, overall Option data continued to indicate that the broader trading range for the Nifty50 may remain 17,000 to 18,000 levels.

Bank Nifty also opened positive at 39,190 and headed towards 39,500 mark, but failed to hold at higher levels and cascaded down to 38,800. It gave up its entire gains of the day in the last tick and closed with losses of 88 points at 38,951.

The banking index has formed a bearish candle on daily scale but is still forming higher highs from three sessions. Now, it has to hold above 38,888 levels to mark an up move towards 39,250 and 39,500 whereas supports are seen at 38,750 and 38,500 levels, said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

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