The Nifty broke below its four key support levels on Thursday as bears managed to build pressure on markets from the word go. The index slipped below its crucial 5-days exponential moving average (DEMA), 10-DEMA, 13-DEMA, and 20-DEMA to form a ‘Bearish belt hold’ kind of pattern on the daily candlestick charts.
A ‘Bearish belt hold’ pattern is formed when the opening price becomes the highest point of the trading day (intraday high), which means that there is a small or no upper shadow and the index declines throughout the trading day which make up for the large body and a small lower shadow.
The Nifty, which opened above its crucial resistance level of 9,200 at 9,202.50 rose slightly to 9,202.65, but then bears pushed the index to its intraday low of 9,144.95 before closing the day at 9,150.80, down 52 points or 0.57 percent from its previous close of 9,203.45.
Traders should remain cautious and refrain from creating any long positions till the index trades below 9,200-9,250 levels. If the selling pressure continues next week, the next logical target for the index is placed at 9,050-9,090.
“The Nifty registered a Bearish belt hold formation on daily charts as it continued to slide from the opening tick itself and went on to sign off the day near to its lowest point whereas on the weekly charts it registered a small bear candle suggesting narrow movement throughout the week,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Chillicious.com.
“Thursday’s price action not only confirmed that short-term top is in place but also damaged the technical picture as Nifty appears to have decisively broken its 13-days EMA as well as the two-month-old ascending channel which has propped up the prices higher in the past,” he said. Mohammad further added that this channel breakdown is throwing up a target of 9,019 levels.
The trend is likely to continue to remain downwards in the short-term as long as the index trades below 9,247-9,280 levels on closing basis. The options data also indicate significant Call writing at strike prices 9,200 and 9,300 which will act as crucial hurdles for the index.
On the options front, maximum Put OI was seen at strike price 9,000 followed by 9,100 while maximum Call OI was seen at strike price 9,300 followed by 9,200.
Fresh Call writing was seen at strike price 9200 which is shifting its resistances to lower levels and putting sustained pressure to restrict its upside momentum.
“The Nifty index formed a Bearish belt hold Candle on the daily chart and given the lowest daily close in the last ten trading sessions. It decisively closed below 13-DEMA and also broken its rising support trendline by connecting lows of 8,712, 8,903 and 9,024,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Chillicious.com.
“The short-term weakness may persist in the market till it remains below 9,191-9,218 levels. On the downside, if follow-up selling continues then index may drag towards 9,090 and 9,050 while on the upside multiple hurdles are seen at 9,250 and 9,280,” he said.