According to Mazhar Mohammad, in next trading session a close below 11,630 can act as a confirmation for short term weakness that can set a bearish tone for the near term
Nifty started the first day of FY20 on a strong note, making an attempt to test its previous life-time high of 11,760, but selling pressure in the last hour of trade pulled the index below 11,700.
The index closed near its intraday low and opening value due to lack of buying conviction, and formed 'Gravestone Doji' kind of pattern on daily charts, which indicated that some breather for bulls can't be ruled out around these levels, experts said.
A Gravestone Doji is formed when open, low and the closing price are all at a similar level. The candle would have a long upper shadow that would depict a fall from the intraday high and no lower shadow.
The long upper shadow signifies selling pressure in trade that pushed the index towards its opening level. It is considered as a bearish reversal candlestick pattern.
The 30-share BSE Sensex managed to hit a life high of 39,115.57 intraday, before closing 199 points higher at 38,872.
Nifty after opening higher at 11,665.20 extended gains to hit an intraday high of 11,738.10, but profit booking in the last hour of trade wiped out some gains and forced it to intraday low of 11,644.75. The index rose 45.30 points to close at 11,669.20.
"Nifty50 appears to have registered a Grave Stone Doji kind of formation as it shied away from life-time highs by a meagre 22 points, unlike Sensex that registered new life-time high, before giving up its intraday gains," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said this kind of steep fall from intraday high of 11,738 is suggesting lack of conviction and uncertainty about further gains at higher levels.
As oscillators on both daily and weekly charts appear to have overheated with overbought readings, some breather for bulls can't be ruled out around these levels, he added.
According to Mazhar Mohammad, in the next trading session, a close below 11,630 can act as a confirmation for short-term weakness that can set a bearish tone for the near term.
He advised traders to maintain a neutral strategy on the index for time being and wait for either consolidation or correction before creating fresh longs.
"Nifty index has been forming higher highs and higher lows from past five trading sessions and formed a Doji on the daily scale that indicates presence of an immediate barrier of 11,760 at higher levels," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited told Moneycontrol.
He said now the index has to hold above 11,550 zone to extend its gains towards lifetime high of 11,760 while on the downside support is seen at 11,550 and then 11,480.
India VIX moved up by 4.55 percent to 17.96.
VIX started to hold at higher levels so it requires a cool off to shift its base to higher zones, experts said, adding option band signifies a broader trading range of 11,400-11,800.
For Nifty options, maximum Put open interest (OI) is at 11,000 followed by 11,500 strike while maximum Call OI is at 12,000 followed by 11,800 strike.
Call writing is at 12,200 followed by 11,800 strike while minor Put writing is at 11,600 followed by 11,400 strike.
Bank Nifty continued its positive momentum and made a new life-time high at 30,648. However, it corrected almost 300 points from higher levels and closed 175.90 points lower at 30,250.90.
The index formed a bearish candle on the daily scale."Now till it holds above 30,250, it can extend the rally towards 30,650 and then 31,000 while on the downside support is seen at 30,000-29,888 zones," Chandan Taparia 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.