Most experts feel if the selling pressure extends then the Nifty may move towards 10,400 levels but if the index bounces back above its 50-DEMA then there could be some relief for bulls on the expiry day.
The Nifty50, which started on a flat note, closed sharply lower due to weak global cues and fell below its crucial support placed around 10,700 levels on Wednesday, ahead of expiry of June futures & options contracts in the coming session. The index formed a ‘Bearish Belt Hold’ kind of pattern on the daily charts.
A ‘Bearish Belt Hold’ pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day making up for the large body. The candle will either have a small or no upper shadow and small lower shadow.
The 50-share NSE Nifty opened at 10,785.50 which was also the intraday high for the index which resulted in small lower shadow. The bears took control of D-Street in morning trade itself and pushed the index below its crucial support placed at 10,700 levels. It hit an intraday low of 10,652.40 and then bounced back to marginally close above its 50-day exponential moving average (EMA) placed around 10,670.
The index, which is now trading below most of its short-term moving averages such as 5, 13, 20-EMA and 50-DMA, closed down 97.80 points or 0.91 percent at 10,671.40.
Most experts feel if the selling pressure extends then the Nifty may move towards 10,400 levels but if the index bounces back above its 50-DEMA then there could be some relief for bulls on the expiry day.
“Finally it appears that Nifty50 has broken down its consolidation range between 10,850–10,700 levels before signing off the session with a Bearish Belt Hold kind of formation,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said however as Nifty50 closed marginally above its 50-Day EMA (10,669) any bounce back from that level on expiry session shall provide some relief to the bulls. “Else below this level selling pressure shall get further accentuated, as all stops on positional longs may get triggered, with a near term target placed below 10,400 levels on Nifty50. Hereafter bulls may not regain their strength unless Nifty50 closes above 10800 levels.”
Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan said on the way down, the index has broken the swing low of 10,701 as well as the crucial daily moving averages. “These observations indicate that the distribution over last few sessions is finally over & the bears have taken the charge completely.”
He feels the benchmark index now looks poised to test the May low of 10,417 with potential to slide down to significantly lower levels. “On the flip side, 10,785-10,800 shall now act as a key hurdle zone,” he said.
India VIX moved up by 5.55 percent at 13.51 levels. Spurt in VIX indicates limited upside as of now.
On the option front, maximum Put open interest (OI) is at 10,700 followed by 10,600 strike while maximum Call OI was at 11,000 followed by 10,900 strike.
Put unwinding was seen at all the immediate strike price while significant Call writing was seen at 10,800 and 10,700 strike which could restrict its upside momentum. Option data suggests an immediate trading range in between 10,600 to 10,750 zones.
“Nifty index broken its consolidation range of 10,700 to 10,835 zones and remained under pressure for most part of the session. It formed a Bearish Belt hold candle on daily scale which indicates that bears are getting some grip on market as it is unable to surpass multiple hurdles of 10,800-10,835 zones,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Securities told Moneycontrol.
He feels now if the index sustains below 10,700 zones then weakness could be seen towards 10,620 zones while hurdles are seen at 10,750 then 10,800 zones.
Bank Nifty witnessed selling pressure towards 26,336 levels and formed a Bearish candle on daily scale.
“Bank Nifty is still away from its major support of 26,250 zones which could provide a meaningful support to the rate sensitive index. It has immediate support at 25,250 while hurdles are seen at 26,750 zones,” Taparia.
