The Nifty 50 erased all its gains in the last hour of trading and closed flat on September 18th, the last day of the week. It mired in banking and financial weakness, with a negative bias between mixed global forecasts.
The index forms a bearish candlestick similar to the bearish belt hold pattern on the daily charts. Rising 0.4 per cent during the week and setting up a dozen candles on a weekly basis.
The bearish belt hold pattern is formed when the starting price becomes the highest point of the trading day. The index declines throughout the session, making a large body. The candle can have a short or upper shade and a small lower shade.
A Doji candle symbolizes the uncertainty between bulls and bears. Bounce sold out due to a lack of follow-up buying interest.
The Nifty 50 opened strong at 11,584.10, which is intraday high and strong. But in the last hour of trading, the index erased all gains. Reached a low of 11,446.10 before ending the session at 11,505 with a decline of 11.10 points.
Experts say 11,500 people need to move forward with psychological help. If it breaks, there could be a sharp correction.
Traders should avoid long positions in the index, but consider shortening the position to less than 11,500, said Mazar Mohammed, chief strategist-technical research & trading adviser at Chartviewindia.in.
“These types of uncertain and bearish candlesticks indicate that the rally is losing its steam after a 62 per cent fall from 11,794 – 11,185 highs,” Mohammed said.
Unless the Nifty closes above 11,618, the upside should not be expected. Sets the tone for a sharp correction below the psychologically significant support of 11,500, which could pull the index lower than 11,185.
However, some meaningful support will be kept on a closing basis between 11,334 and 11,278 levels.
Through the technical view, anything above 11,620 will initially rise to 11,672, but according to Mohammed, it has the potential to re-test recent swing highs to 11,794.
India VIX declined slightly by 0.27 per cent from 20.10 to 20.04.
Following is the correction and volatility, the Nifty trading range indicated by the options data reduced from 11,400-11,800 levels to 11,300-11,700.
On the options front, the maximum put open interest is at 11,500. With a strike of 11,000, and the maximum call open interest at 12,000 after the 11,600 strikes. Call writing seen at 12,000 and 11,800 on strike, while put writing at 11,500 and 11,200 on strike.
The Bank Nifty failed to overcome the immediate barrier of 22,500 and saw sharp selling pressure towards 21,750 in the last hour, hitting a low of 21,784.90 after opening at 22,439.35.
The index fell 289.35 points, or 1.30 per cent, to close at 22,031 setting a bearish level on a daily and weekly level. In fact, the index has slowed down in the last two trading sessions. It corrected 2 per cent per week.
“The Bank Nifty broke the multiple support of 22,000 and gave the daily lowest close in the last 20 trading sessions. Now if it is below 22,000, then the weakness may look towards 21,750 and 21,500, but upwards, key barriers are likely to remain at the 22,500 and 22,750 levels.” Chandan Taparia, Vice President | Analyst-derivatives at Motilal Oswal Financial Services said.
In technical view, positive setup seen in Cipla, Lupin, Divis Labs, Cadila Healthcare, Apollo Hospitals, M&M, Grasim, Tech Mahindra, Wipro, Balkrishna Industries, and UPL while weakness was seen in Petronet LNG, PNB, M&M Financial, Shree Cement, BHEL, Kotak Mahindra Bank, etc, he added.