Technical View: Nifty ends lower, deep correction likely if it slips below 22,000

Market Downtrend

The Nifty closed over a percent lower for a second session in a row on April 15, tracking weakness in global markets stoked by fears of Iran and Israel tensions blowing up into a full-scale conflict.

The Nifty remained under pressure throughout session and ended at 22,273, down 247 points, or 1.1 percent. The index formed a bearish candlestick pattern with gap- down opening on the daily charts. The pattern indicates short- term top reversal and more weakness in the near term.

The index may try to take support at 22,200, which is its 10-week exponential moving average (EMA) followed by 22,000, which coincides with the upward sloping support trendline on the daily charts. A break of it can lead to a major correction. On the higher side, 22,400-22,500 is expected to be key resistance area, experts said.

"The larger degree positive chart pattern like higher tops and bottoms is intact on the weekly chart and present weakness could be in line with the formation of new higher bottom of the pattern. Still there is no confirmation of any higher bottom reversal yet at the lows," Nagaraj Shetti, senior technical research analyst at HDFC Securities said.

Overall, the short-term trend of Nifty continues to be weak. The next lower level to watch is 22,000. Immediate resistance is at 22,400 levels, Nagaraj said.

The options data also indicates that 22,200 is expected to be the next support and then 22,000, with hurdle on the higher side at 22,400-22,500.

On the weekly options front, the maximum Call open interest was at 22,700 strike followed by 23,000 and 22,500 strikes, with meaningful Call writing at 22,500 strike, then 22,400 and 22,300 strikes. On the Put side, the 22,200 strike owned the maximum open interest, followed by 22,000 strike and 22,300 strike, with writing at 22,300 strike, then 22,000 strike.

Bank Nifty

Bank Nifty plunged 791 points, or 1.63 percent, to end at 47,773, its lowest closing level since April 3. It formed a bearish candlestick with upper shadow on the daily charts after taking support at 21-day EMA.

"The next crucial Fibonacci support is placed at 47,443, which also coincides with the 20-day moving average. Thus, 47,400-47,300 is the crucial support zone, while 48,250- 48,300 is the immediate hurdle zone from the short-term perspective," Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas said.

Minor bounce should be used as a selling opportunity, he said.

Volatility also went up, as India VIX jumped 8.1 percent to 12.47, from 11.53 levels.

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