Technical View: Nifty forms ‘Bearish Belt Hold’; 9928 crucial for momentum to sustain

The Nifty took 21 years to hit the landmark level of 10,000 in 2017 since it was launched in the year 1996. However, the index failed to hold on to gains and closed marginally lower making a ‘Bearish Belt Hold’ kind of pattern on the daily candlestick charts.

A Bearish Belt Hold pattern is formed when the opening price becomes the highest point of the trading day which in Tuesday’s trading session was a record high of 10011.30. After opening, the index then witnesses selling pressure throughout the trading session.

In this pattern, there is small or no upper shadow and the index declines throughout the trading day which makes up for the large body and a small lower shadow.

In Tuesday's price action, Nifty50 opened at 10,010.55 which was slightly below its record high of 10,011.30. Hence, there was no or insignificant upper shadow.

It slipped over 60 points to touch its intraday low of 9949.10 which made a slightly long lower shadow. The index finally closed 1.8 points lower from its previous close of 9,966.40 to 9,964.55.

Traders are advised to stay long and initiate buy on dips strategy towards any fall towards 9,900 levels. Don’t go short on the market, just yet because that still needs some confirmation.

However, investors could remain cautious and wait for the index to close above 10K on a closing basis to initiate fresh positions, suggest experts. For the momentum to continue, the index should hold above 9,928 on a closing basis.

“Albeit Nifty50 created a history by testing coveted landmark of 10,000, by the end of the day, it failed to hold the gains and registered a ‘Bearish Belt Hold’ kind of formation,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

Moreover, the rally from the lows of 9792 to 10,011 is looking like a corrective rally in nature as it took 4 days to retrace one day of recent fall from the highs of 9928 registered on July 17, 2017.

“This up move can still be classified as a pullback rally rather than a fresh leg of up move. If it is a pullback rally of the corrective structure in place from the highs of 9928 registered on 17th of July then in ideal scenario market should eventually be trading around 9800 levels in next couple of trading sessions,” said Mohammad.

He advises traders to remain cautious and not to get carried away by the five digit number unless Nifty decisively breaks out above 10,000 marks on closing basis. If that were to happen then next targets can be projected up to 10,350 levels.

In coming trading sessions, sustainability of lower levels will be crucial since Nifty could witness further profit booking as long as 10,011 mark level is not taken out again.

“Once we see a close above 10K then a momentum can be expected in Nifty towards next level of 10200. Buy on dips strategy shall be looked with 9940 - 9910 as a point of initiation,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.

On the options front, maximum Put OI was seen at strike prices 9,900 followed by 9,800 strikes while maximum Call OI was seen at strike prices 10,000 followed by 10,100.

Fresh Put writing was seen at strike prices 10,000, 9,950 and 9,900 strike which suggests that supports are likely to hold while fresh Call writing at 10,000 and 10,050 strike would restrict its upside momentum.

“The Nifty failed to hold its opening gains and corrected towards 9950 mark. The index made a Bearish Belt Hold candle on the Daily chart suggests that it is not an easy or a smooth ride for bulls even after hitting five digit mark,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Major trend of the market is positive and the index has to continue to hold above 9,928 mark to witness an up move towards 10,011 and 10,050 while on the downside supports are seen at 9,880 then 9,850 levels,” he said.