A Bearish Engulfing Pattern is a chart pattern which consists of two candles in which the first candle is a short candle or a white candle and the following candle is a large black candle which engulfs the first candle.
Bears stormed D-St in the second half of trading session on Wednesday and pushed the Nifty below its crucial support placed at its 200-days exponential moving average (DEMA) placed at 10,185 levels. The charts showed the formation of a Bearish Engulfing Pattern.
A Bearish Engulfing Pattern is a chart pattern which consists of two candles in which the first candle is a short candle or a white candle and the following candle is a large black candle which engulfs the first candle.
In simple terms, the bias has now turned mildly bearish in the short term. The 50-share index managed to wipe out gains made not just in the previous session but in the last two trading sessions.
The index, which opened at 10,274, rose marginally to 10,279 but then bears took control of D-Street and pushed the index below 10,200. The index hit an intraday low of 10,111 before closing the day at 10,128 down 116 points or 1.14 percent.
“Volatility appears to be the flavour of the season as Nifty, which was otherwise looking somewhat strong, suddenly took U-turn to register a Bearish Engulfing pattern. It is threatening the trend reversal on the charts,” Mazhar Mohammad, Chief Strategist –Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“However, as this selloff is primarily driven by global concerns the chances of stability in market post RBI policy outcome in next session can’t be ruled out as seldom this kind of news-driven moves last longer,” he said.
Mohammad further added that technically speaking, 10016 is a critical level to watch out for as breach of this level could lead to a retest of 9950 kinds of levels. Upsides for time being shall remain capped around 10279 levels, he added.
India VIX moved up by 7.64 percent at 16.34. A sudden spike in volatility after the consolidation of last six trading sessions has given upper hands to Bears.
On the options front, maximum Put OI was seen at 10000 followed by 9800 strikes while maximum Call OI is placed at 10500 followed by 11000 strikes.
Fresh Put writing was seen at 10000 and 10200 strikes while significant Call writing is seen at 10300 and 10400 strikes which could restrict its upside move.
“Option data suggests a broader trading range in between 10000 to 10250 zones. Volatility is at higher levels in the last six weeks. We are expecting volatility to continue because of global cues and RBI Policy,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“Nifty index failed to hold above its crucial resistance of 10276 zones and witnessed sustained selling till the end of the trading session. It wiped out the gains of previous two days and formed a Bearish Engulfing Candle on the daily scale which implies complete dominance by the Bears,” he said.
Taparia further added that till it holds below 10180 zones, weakness could be seen towards 10050 then psychological 10000 while on the upside hurdles are seen at 10222 then 10276 levels.
