Warning bells ringing! Is it time for investors to go short on Nifty?

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The Nifty which broke below 11,600 recently is poised to go down further toward 11,300 going by commentary from top technical experts tracking the index.

The index formed a ‘Bearish Belt Hold’ kind of pattern on the daily candlestick charts on September 3 which is an indication of a reversal in investor sentiment. Most experts feel as long as Nifty trades below 11,700-11,760 weakness will continue.

After a sharp rally seen in August when index rallied over 2 percent, experts feel we might have made an intermediate top at 11,760 and there is a higher probability that in the near term index moves lower towards 11,300 levels.

“The index formed a strong bearish candle after a gap-up opening. This reversal formation confirmed the short-term top around 11,760 levels with multiple breakdowns on different technical parameters of lower time frame charts,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“As the index settled below its ascending channel which was in progress from the lows of 10557 for the last 45 days it has opened up a new downside target placed around 11425 levels.

“Traders are advised to create fresh short positions by making use of pull back attempt as index head towards 11650 levels. Short-term trend shall continue to favour bears till Nfty50 closes above 11760 levels,” said Mohammad.

One thing which adds to the conviction of traders is a rise in VIX. India VIX measure of volatility has jumped to 13.39 levels after seeing a reversal from the support level of 12.

Good amount of Call writing was seen in 11,800 indicating it will act as overhead resistance for the market in the near term. On the lower side, supports are placed at 11,600 which also has a maximum concentration of Put OI.

“On Monday, the index has broken the swing low of 11639 as well as the lower end of the rising channel. As per the Dow Theory, the index has formed a lower top lower Bottom on the daily chart, which suggests that the short-term trend has turned in favor of the bears,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas told Moneycontrol.

“In terms of the wave structure, the last leg of an Impulse structure on the upside seems to be over at today’s high with a truncation. The short-term momentum indicator has also triggered bearish crossover on Monday. Thus the index now looks poised for a dip towards 11300,” he said.