Traders are advised to avoid long side bets and can consider positional shorts, with a stop above 12,035 on the closing basis, says Mazhar Mohammad
The Nifty remained in the negative for the most part of the session and closed nearly a percent lower on November 8 after Moody's downgrade of India's outlook to negative led to profit booking.
The index closed way below 12,000 levels and formed a bearish candle on the daily charts, hinting at a short-term reversal of trend, whereas there was a Doji pattern on the weekly charts.
The index also closed below the 5-day exponential moving average. If the index breaks crucial support of 11,850 in the coming session, then there could be a sharp correction, experts say.
The Nifty opened lower at 11,987.15 but managed to show some recovery in the afternoon and hit the day's high of 12,034.15. But immediately the index erased the gains and fell sharply to hit an intraday low of 11,888.75. It closed 103.80 points lower at 11,908.20.
"The weakness will be confirmed on a close below 11,850 levels, as a breach of this not only results in a lower low on price chart but also in a breakdown of ascending trendline which is in progress from the lows of 10,691 levels registered on September 20. In that scenario, an initial target close to 11,720 can be expected. In between, decent support is placed around 11,820 levels, where bulls may try to put up some fight," Mazhar Mohammad, Chief Strategist, Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
For the time being, upsides may get capped at around 12,034 and for the resumption of the upmove, the Nifty needs a strong close above the level.
Therefore, traders are advised to avoid long-side bets and can consider positional shorts, with a stop above 12,035 on closing basis, Mohammad said.
India VIX rose by 4.24 percent to 15.85 levels. Options data suggests a broader trading range for the Nifty at 11,800-12,200 levels.
Maximum Put open interest was seen at 11,600 followed by 11,500 strike, while maximum Call open interest was seen at 12,000 followed by 12,300 strike.
Put writing was seen at 11,900 and 11,700 strike, while Call writing was seen at 12,300 followed by 12,200 strike.
The Bank Nifty outperformed the benchmark index and extended its gains towards the 31,100 mark. It gained nearly 400 points on intraday basis but failed to hold the gains.
The index closed at 30,749.40, up 0.38 percent and formed a 'Shooting Star' candle on the daily scale, while forming a bullish candle on the weekly scale. It gained 1.4 percent for the week."Supports are gradually shifting higher and now it has to continue to hold above 30,500 levels to witness an upmove towards 31,000 then 31,250, while on the downside supports are seen at 30,250 then 30,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.