As advance decline ratio completely favoured the bears traders will be better off to adopt a neutral stance till indices register a directional move, Mazhar Mohammad of Chartviewindia.in said.
The Nifty50 continued its weakness for third consecutive session and drifted towards 10,700 zones intraday Monday, forming bearish candle which resembles a 'Bearish Belt Hold' kind of pattern on the daily charts.
Weakness in global markets amid disappointing Chinese data dented sentiment. Banking & financials and technology stocks pulled the benchmark indices lower.
A 'Bearish Belt Hold' pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day 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 flat at around 10,807, which was also an intraday high, immediately drifted lower and touched a day's low of 10,692.35. The index slipped below its 50 DEMA and closed near to its lower band of last five trading sessions, down 57.40 points at 10,737.60.
"Nifty50 continued its consolidation phase with a third consecutive negative close before signing off the session with a 'Bearish Belt Hold' kind of formation," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said once again atleast on closing basis bulls managed to defend the level of 10,700 which is taking a formidable shape as critical support in the near term and hence breach of this level may give much impetus needed for bear to pull the indices further.
On the upsides, for time being, 10,870 shall remain a critical hurdle, which if bulls are managed to conquer, shall signal the beginning of short term uptrend, he added.
As advance decline ratio completely favoured the bears traders will be better off to adopt a neutral stance till indices register a directional move, he advised.
India VIX moved up by 5.26 percent to 16.15 levels. Surge in VIX is putting pressure on market and indicates for limited upside.
On the option front, maximum Put open interest (OI) is at 10,500 followed by 10,000 strike while maximum Call OI is at 11,000 followed by 10,900 strike.
Call writing is at 10,900 followed by 10,800 strike whereas Put writing is at 10,600 followed by 10,400 strike. Option band signifies a broader trading range in between 10,600 to 10,900 zones.
"Nifty index formed a Bearish candle on daily scale and has been forming lower highs from last three trading sessions. It failed to surpass its supply trendline by connecting recent swing highs of 10,985, 10,923 and 10,870 levels," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited said.
Now it has to cross and hold above 10,750-10,777 zones to witness an upmove towards 10,880 while on the downside if it fails to hold the same then it may drift towards 10,650-10,600 zones, he added.
Bank Nifty has been falling from last three trading sessions and corrected from 27,750 to 27,180 levels. The index closed 205.65 points lower at 27,248.25 and formed a Bearish Belt Hold candle on daily scale but respecting to its previous week's low levels."Now it has to cross and hold above 27,350 zones to witness an upmove towards 27,500 then 27,750 zones while major support exists at 27,000 zones," Chandan said.