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Last Updated : Sep 24, 2020 05:54 PM IST | Source: Moneycontrol.com

Technical View: Nifty forms big bearish candle on expiry day, further fall seen if index breaks 10,750

Considering the volatile phase, traders should remain neutral on the index, Mazhar Mohammad of Chartviewindia.in has said.

Sunil Shankar Matkar

The Nifty50 that was off to a losing start corrected nearly 3 percent to break the psychologically important 11,000-mark on September 24, the expiry day for September futures and options contracts.

The index opened sharply lower at 11,011 and extended losses to hit the day’s low of 10,790.20.  It fell 326.40 points or 2.93 percent to close at 10,805.50.

Close

The sixth straight session of fall came amid uncertainty over economic recovery, rising coronavirus infections and weak global cues. It formed big bearish candle on the daily charts.

The Nifty needs to stabilise around 10,800, said experts. If it breaks 10,750, the near-term support, in the coming sessions then there could be further correction.

Considering the volatile phase, traders should remain neutral on the index, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

India VIX jumped by 12.01 percent from 20.99 to 23.51. VIX has spiked by around 17 percent this week, recording its highest closing levels in 36 trading sessions. Higher volatility suggests bear grip with capped upside in the market, Chandan Taparia of Motilal Oswal said.

"…As the vertical fall from the recent highs of 11,584 levels dragged the index towards its 200-day moving averages, some stability in the 10,800–10,750 zone can be expected," Mohammad said.

These long-term averages support is also getting accompanied by oversold levels of the index, he said. If 10,750 is breached on a closing basis, then the weakness can get extended to 10,650, which is the 38.2 percent retracement value of the entire rally from the lows of 8,806 registered on May 18.

If the index stabilises in the next one or two sessions, then it can make a pullback attempt towards 11,000, he said.

Unless the Nifty closes above the day's bearish gap zone of 11,015–11,024, the index can be expected to be stable, he said.

Since it is the beginning of new series, option data is scattered at various strikes. Maximum Put open interest was seen at 10,500 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Marginal Call writing was seen in 11,000 and 11,300 strike while Put writing was seen at 10,600 then 10,500 strike. Option data suggests a wider trading range in between 10,300 to 11,500 levels.

The Bank Nifty continued its lower top-lower bottom formation from the last six trading sessions and continued its weakness for the fourth consecutive week.

The index plunged 721.70 points or 3.41 percent to 20,456.80 and formed a bearish candle on the daily scale with resistances gradually shifting lower.

"The index started the day below a key support of 21,000 and corrected by around 700 points on closing basis. Now till it holds below 21,000 levels, weakness could continue towards 20,000 while medium-term hurdles exist at 21,250-21,500," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Positive setup was seen in Apollo Hospitals, Godrej Consumer Products, Vedanta, Colgate Palmolive, Berger Paints, etc, he said. Weakness was seen in Indiabulls Housing Finance, IndusInd Bank, Shriram Transport Finance, InterGlobe Aviation, Tata Motors, Bajaj Finance, Canara Bank, RBL Bank, TCS, LIC Housing Finance, Motherson Sumi Systems, Ambuja Cements, PVR among others.
First Published on Sep 24, 2020 04:58 pm
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