India VIX moved up by 8.05 percent at 19.58 levels. Volatility is not cooling down which is not giving the relief to bulls and suggests a tight bear grip in the market.
Bears were on a rampage on Dalal Street Thursday. The Nifty50 after weak opening extended losses as the day progressed and broke the psychological crucial support of 10,550 levels intraday. Weakening rupee and rising oil prices, which both raised fear of widening current account deficit, spooked markets.
The index closed sharply lower and made a 'Bearish Belt Hold' kind of pattern on the daily candlestick charts. If the index decisively broke 10,550 levels on closing basis then further selling pressure can't be ruled out, experts said.
A 'Bearish Belt Hold' pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day making up for the large body. The candle will either have a small or no upper shadow and a small lower shadow.
The Nifty50 opened sharply lower at 10,754.70 which was highest point of the day and fell further as the day progressed to hit an intraday low of 10,547.25 amid volatility. The index closed 259 points lower at 10,599.30, the lowest level since June 28, 2018.
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"Bears continued to rule the roost with Nifty50 registering a gap down opening below its 200-Day EMA before signing off the session with a Bearish Belt Hold kind of formation," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
At Thursday's low of 10,547 Nifty50 washed out the entire rally from the lows of 10,557, registered in June 2018 to a high of 11,760 levels which consumed 41 sessions.
"This kind of faster retracement on downside which took only 24 sessions is confirming the fact that market is in a strong downtrend. Once this low of 10,550 is decisively breached then next logical support can be expected around 10,300 levels but bigger target to end this correction shall continue to remain below 9,950 levels," Mazhar said.
He further said on the upsides, Thursday's gap zone between 10,754–10,843 shall assume importance as a critical hurdle going forward. "Hence, any rally in near future shall terminate in this zone where as a close above 10,850 can be considered as a initial sign of strength."
India VIX moved up by 8.05 percent at 19.58 levels. Volatility is not cooling down which is not giving the relief to bulls and suggests a tight bear grip in the market, experts said.
On option front, maximum Put open interest (OI) is at 10,500 followed by 10,700 strikes while maximum Call OI is at 11,000 followed by 11,200 strikes. Significant Call writing is at 11,000 followed by 10,900 strikes while Put writing is at 10,500 and 10,600 strikes. Option band signifies a shift in lower trading range with immediate hurdle at 10,850 zones.
"The Nifty index slipped below its rising trend line on weekly scale by connecting swing lows of 7,893, 9,952 and 10,850 zones. It witnessed sustain selling pressure for the entire session and formed a Bearish Belt Hold candle on daily scale," Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services told Moneycontrol.
He said the index has also breached its 200-D EMA and now till it holds below 10,850 zones, it may continue its weakness towards 10,500 then 10,350 levels while on the upside immediate hurdle is seen at 10,750 levels.