Meaningful Call writing was seen at 11,000 followed by 11,100 while Put unwinding was seen at all the immediate strike price.
After a flat market opening, bears took charge at Dalal Street in the morning trade itself and tightened their grip as the day progressed on Monday.
The Nifty50 broke psychological 11,000-mark and closed near day’s low on account of profit booking after a more than 2 percent rally seen last week, forming ‘Bearish Belt Hold’ pattern on the daily chart.
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 last Bearish Belt Hold pattern was formed on June 27, the day before June futures & options contracts expired.
The major carnage was seen in broader markets as the Nifty Midcap and Smallcap indices fell 2.6 percent and 3 percent respectively.
The Nifty50 after opening flat caught into bear trap and hit an intraday low 10,926.25. The index remained sharply lower throughout the session and closed 82 points lower at 10,936.90.
“Nifty50 registered a ‘Bearish Belt Hold’ kind of formation as it bridged the bullish gap zone of 10,976–10,999 registered on July 12, suggesting downside pressure in the near term,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said in a sense Monday’s move is looking like a consolidation breakdown on lower time frame charts questioning the recent breakout above 10,900 levels. “Hence, it looks imminent for bulls to defend the breakout gap between 10,860-10,876 registered on July 10.
Failure to do so may result in expansion of downswing initially towards its 50-Day Moving Average whose value is present around 10,738 levels, he feels. Hence, short term traders for time being should adopt a neutral stance and look for stability before going long, he said. “Strength in indices may resume on a close above 11,020 levels.”
Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan said the index found support near the May high of 10,929, which now acted as a support as per the principle of role reversal. “On the downside, 10,850-10,800 is a crucial support zone to watch out for. Extension on the upside is plausible as long as the bulls manage to hold on to the support zone.”
India VIX moved up by 5.48 percent at 12.97 levels.
On the option front, maximum Put open interest (OI) was seen at 10,600 followed by 10,700 strike while maximum Call OI was at 11,000 followed by 11,100 strike.
Meaningful Call writing was seen at 11,000 followed by 11,100 while Put unwinding was seen at all the immediate strike price. Option band signifies an immediate trading range in between 10,888 to 11,080 zones, experts said.
“Nifty index failed to hold above psychological 11,000 zones and remained under pressure throughout the trading session. It formed a Bearish Candle on a daily scale which suggests that bears are putting pressure at higher levels,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Securities told Moneycontrol.
He said now it has to continue to hold and sustain above 10,929 zones to extend its gain towards 11,080 while a hold below same could drift it towards 10,888 zones.
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