Mazhar Mohammad of Chartviewindia.in said upside is seen capped at 10,800- 10,845 levels.
On a day Nifty closed the trading session at a seven-month low, the index formed a Bearish Belt Hold candle on the daily charts amid slowdown worries, higher oil prices and consistent FII outflow.
Nifty fell 135.85 points to settle at 10,704.80.
A Bearish Belt Hold pattern is formed when the opening price is the highest point of the trading day (intraday high) and the index declines throughout the session, making up for the large body. The candle will either have a small or no upper shadow and a small lower shadow.
The Nifty50, after opening higher at 10,845.20, which was also a day's high, immediately started drifting lower as the day progressed and hit an intraday low of 10,670.25 in late trade. The index closed 135.90 points lower at 10,704.80.
"Nifty50 continued to witness relentless selling pressure as it registered a Bearish Belt Hold kind of formation with a bigger cut of around 140 points. In this process, it has almost neared the August lows of 10,637 levels breach of which looks inevitable. However, on long-term charts, critical supports are placed in the zone of 10,602–10,568 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
He said even if the said low is breached the downsides initially may get cushioned around these levels with market also approaching oversold levels with a ferocious fall for last 5 sessions from the highs of 11,084.
He advised traders to give priority to cover their shorts and make use of rallies to create fresh short positions. Mohammad added that upside is seen capped at 10,800- 10,845 levels while a close above 10,845 can be considered as initial sign of some strength for near term.
All sectoral indices closed in the red with Nifty Bank, Auto, Financial Services, IT, Metal and Pharma falling 1-1.5 percent. The broader markets also fell more than frontliners as the Nifty Midcap index fell 1.6 percent and Smallcap index lost 1.5 percent.
India VIX moved up by 1.30 percent to 15.55 levels.
On the options front, maximum Put open interest is at 10,800 followed by 10,600 strike while maximum Call open interest is at 11,000 followed by 11,200 strike.
Call Writing was seen at 10,800 followed by 10,700 strike while Put Writing was seen at 10,700 followed by 10,500 strike. Option data suggests a shift in trading range for Nifty to 10,550-10,900 levels.
Bank Nifty continued its formation of lower highs for fourth consecutive session and drifted towards 26,650 levels. The index closed 1.53 percent lower at 26,757.65 and formed a bearish candle on daily scale as selling pressure was seen throughout the session."Resistance is gradually shifting lower and now till it holds below 27,100 levels weakness could be seen towards recent swing low of 26,560 then 26,250 zones while on the upside hurdle is seen at 27,250 then 27,500 levels," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .