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Technical View: Breakdown on charts! Nifty forms strong bear candle, slips below 13-DEMA

On the options front, maximum Put OI was seen at strike prices 10,000 followed by 9,800 while maximum Call OI was seen at strike prices 10,100 followed by 10,200.

August 08, 2017 / 04:53 PM IST

The Nifty50 which started on a positive note came under selling pressure in mid-morning trade on Tuesday and closed below its crucial support level of 10,000 and 9980 making a solid bearish candle on the daily candlestick charts.

The Nifty50 made a strong bearish candle on the daily charts which led to a breakdown on the charts signifies that bears kept the selling pressure throughout the trading session.

The index closed below its crucial support levels of 13-DEMA placed at 10,000. However, it bounced back from its 20-DEMA placed at 9,970.

Traders are advised to cut their leveraged bets and avoid long exposure. The momentum will strengthen once Nifty moves above 10,088 levels.

The Nifty50 opened at 10,068.35 and rose marginally to an intraday high of 10,083.80 but then bears intensified selling pressure which pushed the index towards 9,947. The index closed at 9978.55 down 78 points or 0.78 percent.


Out of last five trading sessions, four are negative closes hinting that tide may be slowly tilting in favour of bears.

“Bears appears to be gaining ground as Nifty50 registered a solid bear candle with a new swing low thereby triggering a classic sell signal on charts in terms of Dow theory as the sequence of lower top and lower bottom completed suggesting that it is on a corrective course,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“If the indices slips below 9950 levels on closing basis then correction should get extended up to 9775 levels where as upsides for time being might have capped around 10,138 levels and traders are advised to avoid long side bets and need to become bullish only on a close above 10,088 levels,” he said.

On the options front, maximum Put OI was seen at strike prices 10,000 followed by 9,800 while maximum Call OI was seen at strike prices 10,100 followed by 10,200. Fresh Call writing at strike prices 10000, 10050, 10100 and 10200 which is putting pressure on bulls.

“Put unwinding at 10100 and 10000 strike suggests that supports are now shifting lower which is not a good sign for bulls. On the technical front, Nifty formed a Bearish Candle on the daily chart and registered a lowest daily close in last ten trading sessions,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“If the index holds below 9980 then it could test 9,950 and 9,928 zones while on the upside resistances are placed at 10050 and 10080 zones,” he said.

Taparia further added that the index has recently corrected from 10137 to 9,950 zones and if major support of 9,928 is broken then short term trend may turn negative.
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Aug 8, 2017 04:53 pm

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