Technical View: Nifty forms bearish candle ahead of FO expiry, tread with caution

Technical View: Nifty forms bearish candle ahead of FO expiry, tread with caution

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The Nifty50 remained rangebound for major part of the session and finally closed the day flat on Wednesday as traders retained cautious stance ahead of expiry of January futures & options contracts and Interim Budget scheduled to be announced on Friday. Traders also await Federal Reserve’s two-day meeting outcome tonight.

The index formed bearish candle on the daily scale, which also resembles ‘Bearish Belt Hold’ kind of formation.

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.

On closing basis more or less indices remained flat suggesting that market is making an attempt to stabilise around 10,600 kind of levels, experts said, adding the market will continue to remain volatile and choppy without giving a proper short term trading opportunity.

The Nifty50 opened higher at 10,702.25 and touched an intraday high of 10,710.20, but wiped out gains in late morning deals to hit day’s low of 10,612.85 and remained rangebound for rest of the session. The index was down 0.40 points to close at 10,651.80.

“Nifty50 made an attempt to pull back with a gap up opening above 10,700 levels but failed to hold on to its gains as it resumed selling which resulted in a Bearish Belt Hold kind of formation in which ideally both opening and high will remain the same,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said as the market is heading for events, like F&O expiry and then for a binary event in the form of interim budget on Friday, it will continue to remain volatile and choppy without giving a proper short term trading opportunity. “Hence, it looks prudent on the part of traders to remain on sideline till the events are cleared out of the way.”

According to him, the strength in indices can be expected on a close above 10,756 levels whereas weakness shall get accentuated further on a close below 10,580 levels with a initial target placed around 10,333.

India VIX fell by 3.15 percent to 17.85 but overall higher volatility is keeping the volatile swing in the market with restricted upside.

On the option front, maximum Put open interest (OI) is at 10,600 followed by 10,500 strike while maximum Call OI is at 10,800 followed by 11,000 strike.

Call unwinding is at 10,900 followed by 11,000 strike while Put unwinding is at 10,800 strike followed by 10,900 strike. Option band signifies a trading range in between 10,550 to 10,777 zones.

“Nifty index has to continue to hold above 10,650 and to cross above 10,700 zones to confirm a short term reversal pattern else weakness could continue in the market,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Now if it manages to hold above 10,690 zones then only bounce back could be seen towards 10,777 zones while on the downside support exists at 10,580 then 10,535 levels, he added.

Bank Nifty relatively outperformed the Nifty index and witnessed a bounceback move towards 26,900 zones. It has negated the formation of lower lows but overall remained highly volatile and formed a small bodied candle on daily scale. The index closed 252.10 points higher at 26,825.50.

“Now it has to hold above 26,666 zones to witness a extended bounce towards 27,000 then 27,150 zones while on the downside support exists at 26,400 then 26,250 levels,” Chandan Taparia said.

courtsey By – https://www.moneycontrol.com/news/technicals/technical-view-nifty-forms-bearish-candle-aheadfo-expiry-treadcaution_12030501.html

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