Moneycontrol
Feb 14, 2018 04:17 PM IST | Source: Moneycontrol.com

Technical View: PSU banks crash party for bulls; Nifty forms bearish candle

Traders are advised to stay light and cautious as the index could well swing in either direction. It witnessed a short covering rally on Monday but a sharp selloff on Wednesday could well put bears on the driving seat.

Kshitij Anand @kshanand
February 11, 2008: The Sensex dropped 4.57 percent within a day, as the Index shed 796.43 points. The benchmark Index fell 833 points, or 4.78 percent and closed at 16,630 on growing global worries over slowing economic expansion. The reasons cited for this fall were weak global markets and disappointing corporate earnings.
February 11, 2008: The Sensex dropped 4.57 percent within a day, as the Index shed 796.43 points. The benchmark Index fell 833 points, or 4.78 percent and closed at 16,630 on growing global worries over slowing economic expansion. The reasons cited for this fall were weak global markets and disappointing corporate earnings.
 
 
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The Nifty50 which started on a positive note failed to keep the momentum going as D-Street got hit by fraud detected in the Punjab National Bank which weighed on the PSU Banking pack. The Nifty formed a bearish candle and a bearish engulfing pattern on the daily charts.

Punjab National Bank share price slipped 9.8 percent lower at Rs 145.80 after the bank detected some fraudulent transactions worth Rs 11,300 crore in its Mumbai branch. Selling pressure extended in the last one hour of trading towards most of the PSU banks.

The Nifty closed below its short-term moving averages of 5-days exponential moving average (DEMA) and 50-DEMA. A break above 10,600 could turn the table in favour of the bulls while a close below 10,398 could extend the selling pressure which could take the index towards 200-DMA.

Traders are advised to stay light and cautious as the index could well swing in either direction. It witnessed a short covering rally on Monday but a sharp selloff on Wednesday could well put bears on the driving seat.

The Nifty50 which opened at 10,585 rose marginally to hit an intraday high of 10,590 but then bears took control and pushed the index below 10,500 to hit its intraday low of 10,456. It closed 38 points lower at 10,500 on Wednesday.

“Bears appears to have snatched the game away from bulls as they dominated in the last one hour of the session which resulted in a bearish candle formation mimicking Bearish Belt Hold pattern,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“For bulls, 10,600 is becoming a bigger hurdle and the way they surrendered in the last one hour is certainly looking like a cause for concern. Unless Nifty50 recovers from next session trading shall remain sideways with negative bias and selling shall get accelerated if 10398 is breached on the downside,” he said.

Mohammad further added that it looks imminent for the bulls to clear the resistance of 10600 to remain in the game else trades should continue to favour bears.

India VIX fell down by 3.89 percent at 17.18 which is a positive sign. On the options front, maximum Put open interest was seen at 10500 followed by 10000 strikes while maximum Call OI is at 11100 followed by 11000 strikes.

Fresh Call writing was seen at 10500, 10600 and 10700 strikes while Put writing was also seen at 10500 strikes.

“Sustained Call writing at all higher strikes suggests limited upside and Option band signifies a broader trading range between 10400 to 10600 zones,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty index wiped out the entire gains made in the last session and formed a Bearish Engulfing pattern on the Daily chart. It has been taking hurdle at its 50 DEMA from last six trading sessions and cluster of supply is visible at 10600-10650 zones,” he said.

Taparia further added that if Nifty sustains below 10480 then weakness could continue towards 10400 then 10333 while on the upside immediate hurdles are seen at 10550 then 10600 levels.
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