Bulls failed to keep the momentum going as the Nifty closed below its crucial psychological level of 9,150 and made a bearish candle similar to ‘Bearish Belt Hold’ kind of pattern on the daily candlestick charts on Monday.
The Nifty rose marginally to 9,167.60 after opening at 9,166.95 on Monday which became the highest point of the day. It witnessed sustained selling pressure throughout the trading day and closed 33 points lower at 9,126.85.
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.
For the momentum to sustain, Nifty has to trade above its previous record high level of 9,119. It took support near its 5-days EMA placed at 9,105.
Technical analysts see a correction to get extended for a couple of days more as some trend following momentum oscillators have generated a sell signal, but it is still a buy on dips market till the time it holds 9,020 level.
“The Nifty registered a ‘Bearish Belt Hold’ kind of formation as it continued to move down right from the opening tick before signing off the day near to its lowest point,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Chillicious.com.
“This correction is likely to get extended for a couple of days more as our trend following technique as well as momentum oscillator, which has higher accuracy in calling short-term turning points, generated sell signal simultaneously on lower time frame charts,” he said.
The Nifty may extend the corrective swing and test the gap zone of 9,060 – 8,975 registered on March 14 as a reaction to election verdict.
Mohammad further added that there is no need to panic even if the markets goes through some correction. “There are multiple technical supports are now available around 9020 levels making a compelling case to buy on dips for higher targets placed around 9,350,” he said.
On the options front, maximum Put open interest (OI) is placed at strike prices 8,800 followed by 8,900 while maximum Call OI was placed at strike prices 9,200 followed by 9,300.
Fresh Put writing was seen at strike price 9,000 and 9,100 which is holding the support while fresh Call writing was seen at strike prices 9,100 and 9,200 which are restricting its upside momentum.
“Options data indicate that fresh Call writing at strike prices 9,100 and 9,200 is restricting bulls. On the technical front, Nifty50 made a small bearish candle similar to a Bearish Belt hold pattern on the daily chart,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Chillicious.com.
“It failed to hold 9,160 but found support near to previous lifetime high of 9,119. It partially filled a positive gap of 9,106-9,128, made on 16th March 2017. It has to hold above 9119 to witness an up move towards 9,218 and 9,250 while on the downside support exists at 9,075 and 9,000 level,” he said.