The Nifty after trading sharply lower in the morning recovered more than half of the losses in the afternoon on February 27, the last day of the February series.
The index continued the downward trend for the fifth consecutive session on the expiry day, echoing weak global sentiment arising out of fears of coronavirus turning into a pandemic, and formed a small-bodied red candle that resembles a Hammer pattern on daily charts.
A Hammer is a bullish reversal pattern, which occurs at the bottom of a trend. This pattern appears after or during a downtrend. It is a single candlestick pattern.
Though the index decisively breached its 200-day simple moving average, placed at 11,687, it smartly recoiled from the intraday low of 11,536.70 and closed 45.20 points lower at 11,633.30.
The volatility declined after rising above 18 levels, falling by 2.71 percent to 17.76 levels.
"The last 55 days of price action appears to have chalked out some sort of a down slopping channel, from whose support the Nifty appears to have bounced back from the lows of 11,536 levels. Hence, as long as this index sustains above 11,500 levels, some sideways consolidation with positive bias can be expected as the Nifty is already in oversold levels with a vertical fall from the highs of 12,152 in the last five consecutive sessions," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
On the upside, if it manages to close above 11,687, then the pull-back attempt can initially get extended to 11,775. On the downside, a close below 11,500 can drag the index down further towards 11,342, he said.
It will be prudent on part of traders to wait for consolidation and some signs of strength as fear factor appears to be dominating on the bourses, he said.
Since it is the beginning of a new series, the options data is scattered at various strike prices. Maximum Call open interest was seen at 12,000 then 12,500 strike while maximum Put OI was seen at 11,800 then 11,700 strike.
Minor Call writing was seen at 11,800 strike, while Put writing was seen at 11,600 strike.
"Options data scattered at nearby strike thus not giving any sense for immediate range, while as per volatility, the broader trading range could be 11,300 to 12,000 zone for the Nifty," Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services, said.
The Bank Nifty opened on a negative note and fell towards 29,900 levels in the initial trade. The banking index breached its support of rising trend line and 200-EMA in intraday trades but managed to close above the same amid a decent bounce in the later half of the session.
The index closed at 30,187, down 0.40 percent, and formed a Hammer candle on the daily chart, indicating buying interest at lower levels.
"If the Bank Nifty sustains above 30,300 levels, then we may see a bounce back towards 30,750 and then 31,000 zone. While if it breaks 29,900, then selling pressure may accelerate towards 29,600 and 29,350 levels,” Taparia said.