Technical View: Bears make merry on D-St! Nifty forms a bearish candle, slips below 20-DMA

It was yet another day for bears, as Nifty50 registers a bearish candle for the third consecutive day in a row on Wednesday. The index broke below four support levels of 5-days exponential moving average (DEMA), 10-DEMA, 13-DEMA, and 20-DMA in just one trading day.

The Nifty50 found support near 9,900 and the best strategy would be to stay light instead of trying to rise the momentum. Given the fact that Nifty is trading near key support levels, some bit of bounce back cannot be ruled out.

The Nifty50 opened at 9961 and rose to an intraday high of 9969.80. Bears took control of D-Street and index witnessed selling pressure which took Nifty to its intraday low of 9893.

If the index stays below 9,928 levels in the coming session, chances are that the index could well correct towards 9,850 and further towards 9,800 levels, suggest experts.

The momentum on the higher side will continue once the index closed above 9,980-10,000 levels convincingly, they say. In the futures and options market, there is a shift in option band to lower strikes which suggest that supports and resistances are shifting lower.

“In line with our expectations Nifty50 registered a bearish candle as a follow through to the weak chart structure confirmed in Tuesday’s session,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Besides, the way Nifty50 was sold off after the intraday pull back witnessed in the latter half of the session is acting as some sort of confirmation that markets are in a short term down trend as short term supports are getting broken one after the other,” he said.

Mohammad is of the view any follow through selling in next trading session should eventually drag down the indices towards its 50-days moving average placed around 9,768 levels.

Traders are advised to avoid buying the dips for time being as they will be better off by waiting for some initial signs of strength.

On the options front, maximum Put OI shifted to 9800 followed by 10000 while maximum Call OI is at 10100 followed by 10200 strikes. Fresh Call writing at 9900 to 10200 strikes while Put unwinding is seen at 10000 to 10200 strike.

India VIX moved up by 5.34 percent at 13.45. VIX has been moving higher for the third consecutive session and hit the fresh five months high levels.

“VIX has been holding above 12.50-13 band and by nature, it has a negative correlation with Nifty index. Rising volatility with falling Put Call Ratio suggests that bears are getting grip on the market,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

India VIX has to cool down below 12.50 to get the market stability else hedging position is advised for leveraged long position.

“It has broken and closed below immediate support of 9928 and now a hold below the same could drag the index towards 9850 and then further towards 9800 zones while hurdles are shifting lower to 9980 zones,” said Taparia.

He further added that the index has started to form lower highs – lower lows and till it does not negate this formation, short term weakness could prevail in the market.