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Last Updated : Jul 19, 2019 05:36 PM IST | Source:

Technical View: Nifty forms 'Long Black Day' pattern, next downside target seen at 11,300

Mazhar Mohammad said upside strength in Nifty shall not be expected unless it closes above 11,640 levels.

Sunil Shankar Matkar

Bears tightened their grip over Dalal Street on July 19 for the second consecutive session and sent benchmark indices to their lowest levels in the last two months. The steep was fall attributed to Finance Minister's denial to tweak super-rich surcharge on FPIs, tepid results by banks and rising slowdown concerns.

The Nifty50, after an opening on a positive note, remained under selling pressure throughout the session and breached 11,400 level intraday.


The index formed large bearish candle which resembled a Long Black Day pattern on daily scale, as it witnessed a major fall of around 241 points (the range between intraday high and low) in a single session which appears to have reinstated the bears in the driver’s seat.

The fall witnessed in the last two sessions indicates that the index can see much lower levels amid consolidation, experts said.

The Nifty50 opened higher at 11,627.95 and hit an intraday high of 11,640.35, but after initial few minutes of positive trade index gradually started falling as the day progressed and hit an intraday low of 11,399.30 in late trade. It closed at 11,419.25, the lowest level since May 17 this year, down 177.60 points or 1.53 percent.

Interestingly, the last two trading sessions' price action washed the entire pullback rally from the lows of 11,461–11,707 levels which lasted for 6 sessions.

"This kind of faster retracement on the downside is clearly suggesting that a fresh leg of downswing is in progress and hence going forward much lower levels can be expected," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

Moreover, Friday's fall has not only filled the euphoric gap, whose lower end is placed at 11,426, but also failed to sustain above that level on the closing basis which resulted in a major breakdown on weekly charts as well as Nifty closed below the multi-week ascending channel, he said.

However, as Nifty registered a fall of almost 300 points from the recent high of 11,706 levels, in just 3 sessions, some relief rally in the form of a tepid bounce can't be ruled out going forward, and such bounce towards 11,500 can be an opportunity to create fresh shorts and look for initial targets close to 11,300 levels, he added.

For the week, the index lost over a percent and formed a bearish candle on weekly scale.

Mazhar Mohammad said upside strength in Nifty shall not be expected unless it closes above 11,640 levels. Traders are advised to remain neutral on the long side and make use of pullback attempts to create fresh shorts, he advised.

On the option front, maximum Put open interest (OI) is at 11,300 followed by 11,400 strike while maximum Call OI is at 11,600 followed by 11,700 strike.

We have seen Put writing at 11,400 and 11,350 strikes while meaningful Call writing is at 11,500 followed by 11,600 strike. Option data suggests a shift in trading range in between 11,300 to 11,600 zones.

India VIX moved up by 6.51 percent to 12.51 levels. Volatility moved up after the declines of the last two weeks.

Bank Nifty broke multiple supports of 30,250 zone and drifted towards 29,700, the lowest level in the last two months. The index settled at 29,770.35, down 660.25 points.

"It has also given a break down from its consolidation band of last eight weeks and formed a big bearish candle on the daily as well weekly scale. Now till it remains below 30,000 zone weakness could continue towards 29,500 then 29,250 zone while on the upside major hurdle is seen at 30,250 level," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

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First Published on Jul 19, 2019 05:31 pm
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