The Nifty50 was caught in a bear trap from the early trade and closed half a percent lower on November 22, dragged by banks, technology and select FMCG stocks.
The index closed below 11,950 levels and formed the 'Bearish Belt Hold' pattern on daily charts while, for the week, there was a Doji kind of pattern formation on the weekly scale for the third consecutive week. It gained 0.16 percent during the week.
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 have a small or no upper shadow and a small lower shadow.
The formation of a Doji candle indicates indecisiveness among the bulls, as well as the bears, as the index closed near the opening levels, and the bounces were being sold in the absence of follow-up buying interest.
Broadly, the index remained in a range of 11,800-12,050 levels for another week and continued to hold its 13-day exponential moving average, placed at 11,899, if it breaks the same, there could be selling pressure in coming days. But, overall, it could be another week of consolidation, experts feel.
The Nifty50, after opening flat at 11,967.30, which was also its near intraday high (11,968.10) and previous closing value (11,968.40), immediately started drifting lower and hit a day's low of 11,883.50 in afternoon. The index closed 54 points lower at 11,914.40.
"Nifty50 extended its weakness for second day in a row as it registered a 'Bearish Belt Hold' kind of formation whereas on weekly charts a Doji is witnessed for the week. This is clearly suggesting that the market is on a pause mode for time being and looks like in a range of 12,035 to 11,800 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
According to him, as it is holding on to its 13-day exponential movig average (11,899), a breach of this on closing basis shall accentuate selling pressure further with initial targets of 11,802 levels.
But, as weekly charts are also displaying weakness with sell signals on some of the momentum oscillators, a close below 11,800 should trigger a much bigger fall whose magnitude can be of 200 points from 11,800 levels, he added.
Hence, he advised traders not to buy the dip in haste. It will be better to wait for some signs of strength which should be expected on a close above 12,035 levels whereas shorting can be considered on a close below 11,890 levels.
On the monthly options front, the maximum Put open interest was seen at 11,900 followed by 11,800 strike while the maximum Call open interest was seen at 12,000 followed by 12,100 strike.
The meaningful Call writing was seen at 12,000 and then 11,950 strike while the minor Put writing was seen at 11,850 and 11,800 strikes.
The above Option data suggests the Nifty could trade in a range of 11,800 to 12,100 levels.
India VIX declined by 0.72 percent to 14.87 levels.
The Bank Nifty index corrected by 0.76 percent to close at 31,111.60 and formed a Red body candle on daily chart. While the banking index concluded the week with marginal gain of 0.33 percent over its penultimate week's close and formed a Doji candle on weekly scale.
"It continued to make Higher Highs – Higher Lows for the sixth consecutive week. Thus, the overall trend remains positive. Till the time, it sustains above 30,800 levels, we maintain our positive stance for an upside momentum towards 31,500 – 31,800 while next support below 30,800 is placed at 30,350 levels," Chandan Taparia, Vice President and Analyst-Derivatives at Motilal Oswal Financial Services, said.