Technical View: Nifty forms Bearish Belt Hold pattern, may go below 11,591 if it breaks 50-DMA

Nifty extended selling pressure for the fourth consecutive session on June 17, losing more than 150 points amid global trade war worries and geopolitical tensions in the Middle East.

The index closed below its 10,700 psychological level and formed a 'Bearish Belt Hold' candle on the daily scale as made an opening high and closed near the day's low.

As the index breached all support levels from 11,888 to 11,700, the market could see further selling pressure but if it holds its bullish gap zone of 11,591-11,426 created in May then there could be consolidation followed by an upward journey, experts said.

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 a small lower shadow.

Nifty started the day trading marginally higher at 11,844 which was also an intraday high, but immediately drifted lower and extended selling pressure as the day progressed. The index hit day's low of 11,657.75, before closing 151.10 points down at 11,672.20.

"Nifty registered a breakdown from the narrow trading range of weekly charts before signing off the session with a 'Bearish Belt Hold' kind of formation. As all critical short term supports are breached the said index has approached its 50-day moving average (11,656) where it should ideally stabilise to prevent further damage," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said as this breakdown led to the emergence of directional move on the downside, the breach of said average can drag it down further into the euphoric bullish gap zone of 11,591–11,426, registered on May 20, which ultimately looks like the ideal destination for this leg of the downswing.

Contrary to this, strength on the upside shall be expected only on a close above 11,844, he said.

In case if Nifty fails to close below its 50-day moving average in the next session (11,656) then traders shall give preference to book profits in their short positions, Mazhar Mohammad advised.

India VIX moved up by 5.40 percent to 14.65.

For Nifty options, maximum Put open interest (OI) was at 11,500 followed by 11,700 while maximum Call OI was at 12,000 followed by 12,500. Meaningful Call writing was at 11,800 followed by 11,700 while Put writing was at 11,600 then 11,700. Options data suggests a lower trading range of 11,500-11,929, experts said.

"Nifty index has been making lower highs - lower lows from the last four trading sessions and broken all the support of 11,888, 11,761 and 11,700. Now till it remains below 11,761, weakness could persist towards next support of 11,600 and 11,550 while medium-term hurdle is now shifting at 11,888," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Bank Nifty continued its selling pressure as it has broken 30,600 and drifted towards the next support of 30,250. The index closed 341.10 points lower at 30,273.25.

It formed a bearish candle and has been making lower highs - lower lows from last four trading sessions.

"It has given a lowest daily close in last 20 trading sessions and is trading close to its 50-DEMA. Now till it holds below 30,600, it may extend its weakness towards 30,000 then 29,600, while on the upside, resistances are seen at 30,600 then 31,000," Chandan Taparia said.