Investors are advised to stay cautious but if you are long the keep a stop below 10,550 levels. A slip below this level could see Nifty cracking by 1-2 percent, suggest experts.
The Nifty50 closed below its crucial support placed at 10,600 levels on Friday which could accelerate the selling pressure on D-Street and the next major support could come at 50-days moving average placed at 10,550-10,560.
The Nifty50 now trades below its key short-term moving averages such as 5-DEMA, 13-DEMA, and 20-DEMA. The index formed a bearish candle on the daily candlestick charts and a Bearish Engulfing candle on the weekly scale which indicates dominance by bears.
Investors are advised to stay cautious but if you are long the keep a stop below 10,550 levels. A slip below this level could see Nifty cracking by 1-2 percent, suggest experts.
The Nifty index opened flat but continued its losing streak for the fourth consecutive session. It opened at 10,671 and rose to an intraday high of 10,674.
Bears took control of the market in mid-morning trade and pushed the index below 10,600 levels to touch its intraday low of 10,589. The index finally closed 86 points lower at 10,596.
“The Nifty50 registered a robust bear candle on daily charts whereas entire weekly price action resulted in a bearish engulfing formation on the weekly charts thereby strengthening the possibility of a multi-week corrective and consolidation phase,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“If the correction doesn’t end around its 50-day moving average placed around 10,550 levels then it should ideally extend by another 1-2 percent with the downside targets placed in the zone of 10,440 – 10,324 levels,” he said.
Mohammad further added that based on our wave counts, one corrective structure shall end between 10,601 – 10,550 levels and as Nifty50 dipped inside this critical zone traders are advised to wait for some signs of strength before initiating long positions and for this bet, a stop below 10,550 on closing basis looks to be the ideal level.
India VIX moved up by 5.54 percent at 14.15 levels. On the options front, maximum Put OI is placed at 10,500 followed by 10,600 strikes while maximum Call OI is placed at 11,000 followed by 10,800 strikes.
Meaningful Call writing was seen at 10,600 followed by 10,700 strikes which are restricting its upside momentum while Put unwinding is seen at all the immediate strikes which are providing scope for further decline.
“Option data suggests an immediate trading range between 10,550 to 10,700 zones. The Nifty formed a Bearish Candle on a daily scale and Bearish Engulfing candle on a weekly scale which indicates dominance by bears,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“It finally negated its higher lows formation on the weekly scale after the momentum of last seven weeks. Now, till it holds below 10,680 zones weakness could extend towards its next support of 10,550 zones while on the upside hurdles are seen at 10,680 and 10,725 levels,” he said.
