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Technical View: Nifty forms bearish candle; 12,000 crucial in Jan series

Mazhar Mohammad advised traders to avoid buying the dip

December 26, 2019 / 06:49 PM IST

The Nifty50 finally slipped sharply on December 26, the expiry day of December derivative contracts, after consolidation seen in last couple of sessions following previous week's record high levels.

The index closed way below 12,200 levels on account of profit booking in heavyweights and formed bearish candle on daily charts for second consecutive session as closing was lower than opening value.

12,000 would be crucial level to watch out for in coming sessions and if that breaks then there could be steep correction which can be used as a buying opportunity, experts feel.

The Nifty50 opened flat at 12,211.85 and after initial few minutes of volatility, the index slipped into red and extended losses as the day progressed to touch an intraday low of 12,118.85. It closed 88 points lower at 12,126.50.


"Weakness appears to be getting more pronounced in Nifty50 as it decisively closed below its short term moving averages with three consecutive negative candles. Hence, this counter can continue to remain under pressure with initial targets placed nearby 12,000 levels. In case if Nifty fails to sustain above 12,000 levels on closing basis then a bigger target towards 11,800 can't be ruled out," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said any recovery attempt shall remain short lived with limited upsides placed around 12,200 levels and some sort of stability and strength in the index shall be expected only on a close above 12,221 levels.

Mazhar Mohammad advised traders to avoid buying the dip and positional traders to consider shorts on any recovery attempt in next session preferably around 12,150 levels with a stop above 12,200 on closing basis whereas intraday traders can go short below 12,118 levels and look for a target of 12,020 with stop above day's high.

Since it is the beginning of new series, option data is scattered at various strike prices. On options front, maximum Put open interest was seen at 12,000 followed by 11,500 strike, while maximum Call open interest was at 12,200 followed by 12,500 strike.

Call writing was seen in 12,200 and 12,400 strike while Put writing was seen at 12,000 then 11,700 strike.

"Option data suggests that the Nifty could trade in a wider range of 11,900 to 12,300-12,500 levels. India VIX is currently hovering around its strong support zone of 10 – 11 and thus we see reversal in VIX in coming days," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

India VIX fell by 4.28 percent to 11.12 levels.

Bank Nifty made lower highs for second consecutive session and formed a negative candle on daily scale. The banking index breached its immediate support of 32,000 levels and ended the session a tad below the same, down 283.10 points at 31,997.70.

"Currently, it is hovering around lower end of the Rising Channel on daily chart and a sustainable move below 31,900 may lead to a correction towards 31,700 – 31,500 levels. Resistance can be seen around 32,300 – 32,500 levels," Chandan Taparia said.

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Sunil Shankar Matkar
first published: Dec 26, 2019 05:01 pm
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