Technical View: Nifty forms a bearish candle; support placed at 9685

“The Nifty50 witnessed a robust bear candle as pullback attempt in the early hours of the day was used to sell off thereby strengthening the bearish sentiment further,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“However, as long as it sustains above 9,685 levels than the probability of range bound move between 9700–10,000 will be much higher whereas breach of the critical low of 9685 will dramatically alter the outlook for indices there by throwing up new targets in the zone of 9500 – 9450 levels,” he said.

In order to prevent any kind of price damage and breathe some life into bulls, Nifty50 needs to recover and get past 9,948 levels in next couple of trading sessions without making new swing low below 9,685 levels.

Mohammad further added that traders are advised to watch out for Bank Nifty as Banking bulls have shown some courage and sustained above 50-day moving average in this carnage.

On the options front, maximum Put OI is intact at 9,800 followed by 9,500 strikes while maximum Call OI was seen at 10,000 followed by 10,100 strikes.

Significant Call writing at 9,900 strikes which is going to emerge as a big hurdle from its earlier supply zone of 10,000 and 10,100 levels. Put unwinding was seen at 9800 and 9900 strike which is also giving the scope for further declines.

“Option band signifies the trading band to lower zones with limited upsides while any major Put unwinding in 9800 strikes could give more clarity for its negative momentum,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“India VIX moved up by 1.68% at 14.81 and volatility has been slowly rising from last three sessions. Rising volatility with falling Put Call Ratio suggests that bears are tightening their grip on the market. Till VIX does not stable below 13-12.50 zones, it would be tough for the market to hope for its smooth ride,” he said.

Taparia further added that Nifty formed a bearish candle on the daily chart and is just a few points away from the major support trend line by connecting the lows of 9088, 9448, 9685 and 9720.

“If this trend line is broken decisively, in that case, the short-term trend may continue its pace of selling pressure towards 9,600 zones while on the upside resistances are shifting lower to 9,820 and 9,50 marks,” he said.