Technical View: Nifty forms a bearish candle; a close below 8,792 can trigger selloff

The Nifty failed to hold on to the day’s gains and formed a long bearish candle on the daily charts on April 15, which is not a positive sign for the bulls. The index, which reclaimed 9,200 levels, gave up more than 300 points to close just above 8,900.

The index formed a bearish candle for the second consecutive trading session. A close below 8,792, which was the closing level on April 7, can trigger a fresh selloff, taking the index towards the 8,550-8,000 level.

India VIX fell by 3.35 percent to 49.73 levels. VIX is cooling down from higher levels, which may provide some stability to the bulls.

If the bulls manage to regain control and the index close above 9,112, the closing on April 9, it can fuel buying interest, experts say.

The Nifty, which opened at 9,196, rose to an intraday high of 9,261 but the bears took control and pushed the index to an intraday low of 8,874. The index finally closed at 8,925, 0.76 percent lower from the previous session.

“The price action of the last three sessions suggests that the Nifty is in a consolidation mode with 8,900 as the lower base of this minor consolidation zone. Hence, a breach of the 8,900 level can induce more selling pressure in the index but weakness will be confirmed on a close below 8,792 which shall accentuate the selling pressure,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

“In that scenario, the initial target can be around 8,550 levels but eventually the Nifty may get dragged down into the zone of 8,000–7,850 levels. Contrary to this, strength in the Nifty shall be expected on a close above 9,112 levels,” he said.

Traders should avoid buying the dip but can consider fresh long positions on a close above 9,112 for an initial target of 9,390, Mohammad added.

On the monthly options front, maximum Call OI is placed at 10,000 and then towards 9,000 strikes while the maximum Put OI is placed at 8,000, then towards 9,000 strikes.

Minor Put writing was seen at 9000 strikes. The options data indicates an immediate trading range between 8,500 and 9,500.

“Market fall got accelerated in the second half and corrected by around 400 points from its intraday high of 9,261 levels. Eventually, the index trimmed off all its intraday gains and formed a bearish candle on the daily chart,” Chandan Taparia, Vice President - Analyst-Derivatives at Motilal Oswal Financial Services Ltd said

“It almost engulfed the entire trading range of the last two trading sessions, which is a negative sign for the index. Despite the negative close of the benchmark index, market breadth remained in favour of the advancing counters,” he said.

Taparia added that the index is hovering around 20-DEMA for the last three sessions and now if the Nifty sustains below 8,888 zones, then we may see a fall towards 8,650 and then 8,555 zone. While on the upside, resistance is placed at 9250 then 9400-9500 zones.