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Technical View: Nifty breaks 11,400, forms bearish candle; crucial support placed at 11,340

India VIX moved up by 4.08 percent at 13.37 levels. Spurt in VIX suggests that upside is going to be capped on immediate basis, experts said.

August 13, 2018 / 05:53 PM IST


Bears continued to dominate Dalal Street for the second consecutive session on Monday as the Nifty50 fell sharply, closing far below the psychological 11,400-mark following Turkey crisis and further weakness in the rupee against the US dollar.

The Nifty closed below 5-day EMA as well as 9-day EMA, which offered major support to Nifty in earlier corrections. The index formed small bearish candle on the daily charts.

Closing below 5 and 9-day EMA indicated that there could be significant fall in coming sessions, experts said, adding the next crucial support is placed at 11,340.

The Nifty50 after opening sharply lower and breaking 11,400 levels extended losses as the day progressed and hit an intraday low of 11,340.30. It did manage to claw back above 11,400 in afternoon but failed to hold the same level and closed 73.70 points lower at 11,355.80.

"Inline with negative global cues Indian bourses opened with a 60-point gap down but the intraday recovery towards the said gap area was utilised by market participants for a fresh sell off. Moreover this sell off resulted in the breach of a critical support available in the form of 9 Day EMA which offered support to Nifty50 during corrections in this leg of upmove from the lows of 10,550 suggesting the possibility of significant weakness going ahead," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.


Hence, to avoid this kind of vulnerability it is critical for the indices to bridge the Monday's gap present in the zone of 11,406–11,419 and unless Nifty50 closes above 11,420 strength may not resume in the index, he said.

Besides, from the lows 10,550, Nifty50 is moving in a well defined channel for last 32 sessions and on brekdown below this channel, whose support is present around 11,340, one can project a downside target placed around 11,034, according to him.

However, in between critical support is placed between 11,235–11,185 kind of levels which seems to be the worst case target as of now, Mazhar said.

India VIX moved up by 4.08 percent at 13.37 levels. Spurt in VIX suggests that upside is going to be capped on immediate basis, experts said.

On option front, maximum Put open interest (OI) was at 11,000 followed by 11,200 strike while maximum Call OI was at 11,500 followed by 11,400 strike. Fresh Call writing was seen at 11,500 and 11,400 strikes whereas marginal Put writing was seen 11,200 strike.

"The Nifty formed a Bearish candle but trading near to its rising support trend line by connecting all the recent swing lows of 10,557, 10,630, 10,946 and 11,340 levels," Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Securities told Moneycontrol.

Now the index has to cross and hold above 11,400 zones to get a consolidative move while a decisive hold below 11,350 zones could drift the index towards 11,250 then next major support at 11,171 zones, he said.

Bank Nifty formed a Bearish Belt Hold candle followed by a Bearish Engulfing pattern on daily scale. It slipped below 28,128 zones and corrected towards 27,739 zones.

Now if it sustains below 28,128 zones then weakness could continue towards 27,650 then 27,440 levels while resistance is seen at 28,000 zones, Taparia said.
Sunil Shankar Matkar
first published: Aug 13, 2018 04:51 pm
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