Technical View | Nifty forms tweezer top kind of pattern, indicates possibility of further weakness

The Nifty50 once again failed to hold on to crucial resistance of 17,200 and wiped out all the previous day’s gains on March 23, the weekly expiry day for futures & options contracts. The weakness in global counterparts after the US Fed rate hike weighed on sentiment.

After opening lower at 17,097, the index gradually recouped those losses and touched an intraday high of 17,205 in the afternoon. But it wiped out those gains and finally closed with 75 points loss at 17,077. The index has formed a tweezer top kind of pattern on the daily charts, indicating the possibility of further weakness in coming sessions, as intraday highs on March 22 and March 23 are almost similar.

Also on the hourly charts, the Nifty50 has formed a Double Top kind of pattern, which is also a bearish reversal pattern, suggesting a southward move for the index. The index attempted many a time to surpass the 17,200-17,250 area in the current month decisively but failed, which acted as a support on the last day of February followed by a rally before the recent correction.

Banking and financial services, and technology stocks came under pressure dragging the market down.

“The Nifty once again failed to clear the short-term resistance of 17,210. The index has also formed a double top formation on intraday charts, indicating further weakness from the current levels,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.

For the bulls, he feels 17,050-17,000 would act as important support zones, while 17,200-17,250 could be a key resistance area for the short-term traders. However, below 16,950, the uptrend would be vulnerable, he said.

On the weekly Option front, we have seen maximum Call open interest at 17,100 strike, followed by 17,200 strike and 17,300 strike, with Call writing at 17,100 strike. On the Put side, the maximum open interest was seen at 17,000 strike, followed by 16,500 strike and 16,800 strike, with writing at 16,500 strike.

The above Option data indicated that the Nifty50 may see a trading range of 16,800-17,300 in the near term.

For Nifty to gather momentum on the upside, Rahul Ghose, Founder & CEO at Hedged said Bank Nifty has to close above the 40,200 mark which is its near-term resistance.

Bank Nifty, after a gap down opening at 39,836, managed to show recovery amid volatility and touched an intraday high of 40,202. But the index lost all those gains due to selling in the last hour of trade and closed at 39,617, down 382 points.

Bank Nifty has formed a bearish bearish candle on the daily charts with a long upper shadow, indicating profit booking at higher levels.

India VIX, the fear index fell by 2.14 percent to 14.49 levels, down from 14.81 levels. Overall volatility needs to get back to 12-13 levels for some stability in the market.

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