Technical View: Nifty forms strong bearish candle; 10,440 crucial for bulls

The index formed a Hanging Man kind of pattern in the previous trading session and formation of a bearish candle on Monday confirms the formation of an intermediate top.

Indian market wiped out morning gains and witnessed an intraday movement of nearly 200 points on Monday. The Nifty50 took support at its 13-days exponential moving average (EMA) placed around 10,455 and formed a strong bearish candle on the daily charts.

The index breached its 5-EMA on the downside but bounced back from 13-EMA but failed to close above 10,500 levels. The next crucial support for the index is placed at 10,440 and a close below this level could take the index towards 10,132 levels, suggest experts.

The index formed a Hanging Man kind of pattern in the previous trading session and formation of a bearish candle on Monday confirms the formation of an intermediate top. The index is witnessing selling pressure in the range of 10600-10650.

Monday marks the third consecutive day when Nifty rose above 10600 on an intraday basis but failed to hold on to that level on a closing basis.

The Nifty50 which opened at 10607 rose to an intraday high of 10,645. The index witnessed selling pressure around 10650 which pushed the index below 10500 to hit an intraday low of 10,464. The index finally closed 103 points lower at 10,484.

“In line with our projections, Nifty50 appears to have broken down as it registered a strong bearish candle which eclipsed the three narrow candles of preceding three sessions. However, some support can be expected around 10440 levels but correction shall get intensified further once bears succeed in pushing the indices below the said level on a closing basis,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“In such a scenario critical support is placed around 10,132 levels. The upsides for time being shall remain capped around 10,645 levels and unless this level is cleared on closing basis short-term trend shall continue to remain in favour of bears,” he said.

Mohammad is of the view that traders are advised to stay away from fresh long positions and can consider shorting the index at current process and on rallies close to 10,575 with a stop above 10,650 on a closing basis.

India VIX move up sharply by 9.05 percent at 19.36 levels. The spurt in volatility after the decline of the last two weeks suggests that bears are putting pressure at higher zones. VIX has to cool down below 16 zones to get the next leg of smooth upside rally in the market.

On the options front, maximum Put OI is placed at 10,000 followed by 9,800 strikes while the maximum Call OI is placed at 11000 followed by 10700 strikes.

Fresh Call writing is seen at 10600 followed by 10700 strikes while Put unwinding is seen at immediate strikes which indicate limited upside in the market. The options band signifies an immediate range from 10400 to 10600 zones.

“The Nifty index opened positive but failed to surpass immediate hurdle of 10650 and corrected towards 10450 zones. It has engulfed the consolidation move of last five trading sessions and closed with the loss of more than 100 points,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It has been moving in between 10,450 to 10,650 zones from last six trading sessions and if it fails to hold 10,450 then a breakdown could drag it towards next major support of 10,333 zones while on the upside hurdles are seen at 10,550 then 10,650 zones,” he said.

Source Credits: MoneyControl

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