Technical View: Nifty forms 'Bearish Belt Hold' pattern; support placed at 10,755

The Nifty50 which started on a flat note failed to build on momentum due to weak global cues and slipped towards its crucial support placed around 10,800 on Monday. The index formed a ‘Bearish Belt Hold’ kind of pattern on daily charts.

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 small lower shadow.

In Monday’s price action, Nifty50 opened at 10,830.20 and was also the intraday high for the index which resulted in no upper shadow. The bears took control of D-Street in morning trade and pushed the index below its crucial support placed at 5-exponential moving average (EMA).

Investors are advised to tread with caution and if Nifty fails to reclaim 10,800 in Tuesday’s trading session then there is a higher probability that it will slip towards its next crucial support which is placed around 10,755.

But, a breach of 10,755 which was also the intraday low formed on last Friday (15th June) could bring back bears on D-Street, suggest experts. On the upside, a close above 10,893 (intraday high of 13th June) could restore bullish momentum, they say.

Trading activity seen in the last three sessions suggest that indices are in a consolidation mode which shall eventually lead to a directional move with a breakout in either of the directions.

“Despite the trading range remained extremely narrow for the day with 43 points move the pattern resembles Bearish Belt Hold suggesting domination of bears for the session as both open and high remained same,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Traders are advised to focus on trend deciding levels in short-term which shall lead to a directional move. On downsides 10,755 looks to be a critical breach of which may enhance selling pressure thereby strengthening the bears whereas a close above 10,893 shall reinstate bullish momentum which may lead to breakout above 10,930 levels,” he said.

India VIX moved up by 2.57 percent at 12.38 levels. Lower volatility is supporting the market at every decline but at the same time keeping the restricted upside momentum.

On the options front, maximum Put OI is placed at 10,700 and 10,600 strikes while maximum Call OI is placed at 11,000 followed by 10,900 and 10,800 strikes.

“We have seen Put writing at 10,700 followed by 10,600 strikes while Call writing is seen at 10,800 and 10,900 strikes. Option data suggests a broader trading range in between 10,700 to 10,900 zones,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“On the technical front, Nifty index formed a small Bearish Belt Hold candle and an inside bar as it traded inside the trading range of the last session. It remained consolidative for the most part of the day and finally closed near to 10800 zones,” he said.

Taparia further added that the index is now stuck in a range and requires a decisive range breakout to start the next leg of the rally. “As of now till it holds above 10,750 zones, it could see up move towards 10,850 then 10,888 while on the downside support exists at 10,720 levels,” he said.