The Nifty closed 1.5 percent lower on April 24 after two days in the green following weak global cues and rising uncertainty over a possible treatment for the coronavirus. The decision of US-based fund house Franklin Templeton to shut its six India funds due to liquidity crisis also dented sentiment.
The index closed below 9,200 levels and formed a Grave Stone Doji pattern on the daily charts.
For the week, the index declined 1.21 percent and formed a bearish candle, resembling a Hanging Man pattern on the weekly scale.
A Gravestone Doji is formed when open, low and the closing price are all at a similar level. The candle has a long upper shadow that depicts a fall from the intraday high and no lower shadow.
The long upper shadow signifies selling pressure in the trade that pushed the index towards its opening level. It is considered a bearish reversal pattern.
A Hanging Man is a bearish reversal pattern, which is usually formed at the end of an uptrend or at the top (more than 300-point rally from its recent low of 8,981.45 recorded on April 21).
Experts foresee a sharp sell-off in the coming sessions if the index breaks 13-day EMA. Positional traders can consider shorting the index below 9,045 levels and look for bigger targets.
After opening lower at 9,163.90, the Nifty attempted a recovery in afternoon to hit the day's high of 9,296.90 but failed to turn green. The index touched an intraday low of 9,141.30 in the late trade and closed at 9,154.40, down 159.50 points or 1.71 percent.
"The rally from the lows of 7,511 appears to have unfolded in the form of a Raising Wedge which is a bearish reversal formation. As recent minor corrections in the current sideways phase took support on 13-day EMA (placed at 9,045), a close below this average shall confirm breakdown in the index from the bearish wedge formation, which shall ideally trigger a fresh leg of corrective swing on the downside, with initial targets present around 8,450 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
"As the Nifty is moving in a sideways range of 9,390–8,900 levels, the bulls may try to defend 8,900 levels and once that level is decisively conquered by the bears, then correction shall get accentuated towards 8,450 levels," he said.
Strength in index shall not be expected unless the Nifty registers a strong close above 9,300, he added.
India VIX dropped marginally by 0.29 percent to 39.12 levels. It has gradually been falling for the last four weeks.
On the monthly options front, maximum Call open interest was at 9,500 then 10,000 strike while maximum Put open interest was at 9,000 then 8,000 strike. Meaningful Call writing was seen at 9,300 then 9,400 strike while Put writing was seen at 8,900 strike with Put unwinding at 9,000 strike.
The Bank Nifty opened on a negative note and remained in that territory throughout the session. It underperformed the benchmark index both on the daily and the weekly closing basis and formed a Bearish Engulfing pattern on the weekly scale.
The index concluded the session near to its 20-DEMA for the fourth consecutive session, falling 681.25 points or 3.36 percent to 19,586.70 and formed a small-body candle on the daily chart.
"RSI oscillator is taking resistance around 30-32 levels on weekly chart, indicating selling pressure at higher levels. Currently, the Bank Nifty is moving in sideways direction between broader range of 18,700 to 21,100 levels from last 10 trading sessions and it may move in the same for coming days too," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Going forward, support is placed at 18,700 levels while immediate resistance is placed at 20,000 then 20,500 levels, he added.
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