Technical View: Nifty forms bearish candle, losses to deepen on slip below 21,000

Nifty likely to break 21,000 mark

The Nifty ended sharply lower, reversing early gains as banks and financial services stocks came under selling pressure yet again and analysts are not expecting a quick recovery for banking names.

The index opened positive and hit the day's high of 21,750, which was followed by heavy selling. The index slipped to the day’s low of 21,193. It ended 333 points or 1.54 percent lower at 21,239, the lowest closing since December 20.

The index formed a long bear candlestick on the daily charts, which indicates a sharp downward reversal.

If the index breaks the 21,000 mark in the coming sessions, the correction can deepen to 20,850. On the higher side, 21,400-21,500 may act as a hurdle, experts said.

The Nifty has been forming bearish patterns like lower tops and bottoms. It formed a new lower top at 21,750 and more weakness can be expected from here, Nagaraj Shetti, senior technical research analyst at HDFC Securities said.

The next important support is around 20,950-20,850 and Immediate resistance is at 21,400.

On the monthly options front, the maximum Call open interest was at 22,000 strike followed by 21,700 strike and 21,500 strike, with Call writing at 21,300 strike, then 21,400 strike.

On the Put side, the 20,500 strike owned the maximum open interest, followed by 21,000 strike and 21,200 strike, with writing at 21,200 strike, then 20,800 strike.

The data indicates that the Nifty may face resistance at 21,300-21,50, with immediate support at 21,000.

Bank Nifty

The Bank Nifty played a big role in the downtrend, as 11 of its 12 stocks closed in red.

The banking index plunged 1,043 points or 2.26 percent, to 45,015 and formed a bearish candlestick on the daily charts.

The index is around 450 points away from its 200-day exponential moving average of 44,560, which is crucial for further downside.

"The current sentiment suggests a sell-on-rise strategy, emphasising the prevailing bearish outlook," Kunal Shah, senior technical & derivative analyst at LKP Securities said.

Immediate resistance is at 45,500 and an upward movement towards this level will be the right moment to consider selling positions.

On the downside, crucial support is at 45,000-44,800. A breach may intensify the selling pressure, potentially leading to a decline towards the 44,000-mark, he said.

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