Mazhar Mohammad advised traders to avoid buying the current dip
It was a Manic Monday for Dalal Street indices fell for the second consecutive session on April 22. Nifty, after opening lower, extended losses as the day progressed and closed sharply lower, especially after crude oil prices hit 5-month high.
The index closed tad below 11,600 and formed 'Bearish Belt Hold' pattern on daily charts for the second straight session.
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.
India VIX moved up 5.76 percent to 24.05. The sudden spike in VIX indicates limited upside with a volatile swing in the market.
The index slipped below its crucial support of 11,600 and the next crucial support was now placed at 11,550, experts said, advising traders to avoid buying the current dip.
Nifty after opening lower at 11,727.05 fell sharply further and hit a day's low of 11,583.95. The index closed 158.30 points or 1.35 percent lower at 11,594.50.
"Last two sessions of price action in Nifty is not only pointing towards a failed breakout but also a short term top in place around 11,856," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said as Nifty closed below its critical support of 13 EMA (11,637), which propped up the prices higher on multiple occasions in the past from the lows of 10,585, more pressure can be expected on the downsides with initial targets placed in the 11,550–11,514 zone.
However, if the current leg of fall from the highs of 11,856 is a normal correction then it should end between 11,550–11,514, and contrary to this expectation, if it is a medium-term trend reversal with a multi-week top in place then correction should be much bigger going forward, he added.
Hence, Mazhar Mohammad advised traders to avoid buying the current dip.
For Nifty options, maximum Put open interest (OI) is at 11,500 followed by 11,000 strike price while maximum Call OI is at 11,700 followed by 12,000 strike price.
Meaningful Call writing is at 11,700 followed by 11,800 strike price while minor Put writing is at 11,550 strike price.
Option band signifies a shift in the trading range in between 11,500 to 11,750, experts said.
"Nifty index has also negated its higher highs - higher lows formation after four trading sessions on the daily scale and now till it holds below 11,666, it could extend its losses towards 11,550. On the upside, the hurdle is seen at 11,666," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited said.
Bank Nifty opened negative and witnessed sustained selling for the session and corrected by more than 500 points.
The index closed 535.45 points lower at 29,687.95 and formed a Bearish Belt hold pattern on the daily scale."Till the index holds below 30,000 it could extend its losses towards 29,500 and then at 29,250. On the upside, a hurdle is seen at 30,000," Chandan Taparia said.
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