Mazhar Mohammad advised traders to avoid shorting the index whereas traders with a high-risk appetite could create a positional bet on long side, with a stop below 50-day EMA on closing basis
Nifty erased all morning gains and fell sharply, but managed to close flat after showing recovery in late trade on June 19. Traders remained cautious amid sell-off in stocks that have high debt and ahead of Federal Reserve's interest rate decision due tonight.
The index managed to defend its 50-day exponential moving average (11,659) and remained highly volatile in range of 175 points, forming a High Wave candlestick pattern on the daily chart.
A High Wave pattern is formed when there is massive or wide movement on either side. It is similar to a Spinning Top pattern but has longer shadows. The pattern indicates a market in which there is a lot of uncertainty and indecisiveness.
"For last three trading sessions, it appears that it is defending its 50-day exponential moving average (11,659) at least on a closing basis which has resulted in a flat close, hinting at stability," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
"Hence, sustaining above 50-day EMA on closing basis there can be a decent pullback attempt going forward that will be confirmed on a close above 11,800. In that scenario, initially, a modest target of 11,920 can be expected," he added.
Mazhar Mohammad advised traders to avoid shorting the index whereas traders with a high-risk appetite could create a positional bet on long side, with a stop below 50-day EMA on closing basis.
India VIX moved up 0.89 percent to 14.73. Market volatility is visible even after lower VIX levels because of volatile swings in midcap and smallcap counters, experts said, adding option data suggests a trading range of 11,500-11,929.
For Nifty options, maximum Put open interest (OI) was at 11,500 followed by 11,700 while maximum Call OI was at 12,000 followed by 11,800. Call writing was seen at 11,800 followed by 11,700 while Put writing was seen at 11,700.
"Now till it holds below 11,761, restricted upside could be seen in the market while a hold below 11,666 could open the decline towards 11,600 then 11,550," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Bank Nifty failed to surpass 30,700 and drifted towards its crucial support of 30,250. It has been respecting its 5-DEMA from last three trading sessions but a follow up is missing near resistance zones. The index closed at 30,362.10, up 11.10 points."Now, till it remains below 30,600-30,700, weakness could persist while a drift below 30,250 could open the further decline towards 30,000 then 29,850," Chandan Taparia said.