Technical View: Nifty forms a ‘Bearish Belt Hold’; 9,685 crucial for bulls

Traders should refrain from creating aggressive fresh short at current levels as the Nifty50 index closed just below its crucial support level of 50-days exponential moving average (DEMA) and is now stuck in the bear grip.

If in next one or two trading sessions Nifty50 doesn’t violate 9,740 levels then a small pull back is possible, suggest experts but for the time being, we could conclude that 9948 was the intermediate top for the markets.

If the index sustains below 9775 levels then the selling pressure could drag the index towards 9,720 and then towards 9,685 levels, suggest experts. But, the index is still respecting to its rising support trend line by connecting the swings lows of 9075, 9448 and 9685 mark.

“The index wiped out all its recovery made in last three sessions and slipped below its 50-DEMA. If formed a Bearish Belt Hold candle on the Daily chart and again got stuck in bear grip after the bounce back moves of last four sessions,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Now, if it sustains below 9,775 then fresh selling pressure could drag it towards 9,720 and then towards 9,685 while on the upside hurdles are seen at 9,850 and then towards 9,880 zones,” he said.

India VIX moved up sharply by around 7 percent at 13.50. A sudden spike in volatility after the decline of last one week has given a pause in the bounce back move of the market. Now, VIX has to hold below 12.50 zones to get a smooth ride.

On the options front, maximum Put OI is intact at 9,800 followed by 9,500 strikes while maximum Call OI was seen at strike prices 9,900 and 10,000.

In the next one or two trading sessions, Nifty50 doesn’t violate 9,740 levels then a small pull back is possible which investors should use it to initiate short positions on the index.

“The Nifty50 registered a Bearish Belt Hold kind of formation as it witnessed selling pressure from the opening tick itself. Tuesday’s fall is more or less confirming that 9948 is likely to be the top of the pull back attempt being made by Nifty50 from the lows of 9685 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in.

“Hence, in that scenario, sooner than later the last 10 trading sessions of consolidation shall pave the way for a breakdown below 9685 levels which shall unleash renewed sell off on the index there dragging it down towards 9,450 kinds of levels,” he said.

Mohammad is of the view that one should go short by making use of that pull back with a stop loss of 9,957 for a positional target placed in the zone of 9,500 – 9,450.