Tech view: Nifty forms Bearish Engulfing pattern, indicates further downside ahead
NEW DELHI: The Nifty50 was just eight points short of the 9,000 level in early trade on Thursday, before the bulls turned nervous and capitulated to a strong bear assault.
What now appears on the daily chart is a formation called the ‘Bearish Engulfing' pattern, which suggests further downside is likely on the index.
The large red candle formed on Thursday eclipsed the small green candle made on Wednesday, with some experts suggesting that investors could soon see shorting opportunities.
One has to be extremely cautious, said independent market analyst Kunal Bothra.
“I am not initiating any fresh trade. One has to adhere to extremely cautious trade with strict stop loss and probably look at levels closer to the 8,850 level. If it breaks that level on Friday, then one may initiate fresh short positions on the index,” Bothra said.
A Bearish Engulfing Pattern indicates a bearish trend in future. However, the pattern should not be studied in isolation. Before making any decision on the chart pattern, one should also study the preceding as well as followup structure.
Despite seeing a gapup opening, the index could not hit the 9,000 mark in early trade. The index hit a high of 8,992, before surrendering badly. It closed the day at 8,899, down 0.51 per cent.
“The index formed a Bearish Engulfing Pattern and tested its rising support trend line. It has multiple supports at 8,850 and 8,820 levels, while the 8,982-9,000 zone could act as a key hurdle. The index has got stuck in a trading range and followup buying was missing to give the market a decisive move,” said Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities.
Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory at Chartviewindia.in, who has been a bit bearish over the past few sessions, noted that the Nifty50 completed a major price swing at Thursday’s high of 8,992, thereby opening up significant downside targets that should initially take the index close to the 8,700 level.
“Thursday’s price confirmed a trend reversal as the rally was used to exit positions. We advise traders to go for fresh shorts with an initial target of 8,700 and a stop loss placed above 9,017,” Mohammad said.
Sameet Chavan of Angel Broking expects the 8,867-8,820 range to act as a sheet anchor for Friday.
What now appears on the daily chart is a formation called the ‘Bearish Engulfing' pattern, which suggests further downside is likely on the index.
The large red candle formed on Thursday eclipsed the small green candle made on Wednesday, with some experts suggesting that investors could soon see shorting opportunities.
One has to be extremely cautious, said independent market analyst Kunal Bothra.
“I am not initiating any fresh trade. One has to adhere to extremely cautious trade with strict stop loss and probably look at levels closer to the 8,850 level. If it breaks that level on Friday, then one may initiate fresh short positions on the index,” Bothra said.
A Bearish Engulfing Pattern indicates a bearish trend in future. However, the pattern should not be studied in isolation. Before making any decision on the chart pattern, one should also study the preceding as well as followup structure.
Despite seeing a gapup opening, the index could not hit the 9,000 mark in early trade. The index hit a high of 8,992, before surrendering badly. It closed the day at 8,899, down 0.51 per cent.
“The index formed a Bearish Engulfing Pattern and tested its rising support trend line. It has multiple supports at 8,850 and 8,820 levels, while the 8,982-9,000 zone could act as a key hurdle. The index has got stuck in a trading range and followup buying was missing to give the market a decisive move,” said Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities.
Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory at Chartviewindia.in, who has been a bit bearish over the past few sessions, noted that the Nifty50 completed a major price swing at Thursday’s high of 8,992, thereby opening up significant downside targets that should initially take the index close to the 8,700 level.
“Thursday’s price confirmed a trend reversal as the rally was used to exit positions. We advise traders to go for fresh shorts with an initial target of 8,700 and a stop loss placed above 9,017,” Mohammad said.
Sameet Chavan of Angel Broking expects the 8,867-8,820 range to act as a sheet anchor for Friday.
