India VIX moved up by 10.05 percent at 19.78. Spurt in volatility after the dips of last few sessions suggests that upside could be restricted again in the market, experts said.
The Nifty50 fell sharply for second consecutive session on Friday as bears further tightened their grip on Dalal Street. Liquidity crisis in NBFCs, Reliance's mixed Q2 earnings, H1-B visa issue and weak global cues caused selling pressure in the market.
The index lost around 150 points, and formed small bearish candle (as the gap between opening and closing price was only 36 points), which also resembles a 'Spinning Top' kind of indecisive pattern.
Spinning Top is often regarded as a neutral pattern which suggests indecisiveness on the part of both bulls as well as bears. It can be formed in an uptrend as well as in a downtrend.
After consistent sell-off, the index could show some bounce back in coming sessions which could take Nifty above 10,400 levels, experts said.
The Nifty50 opened sharply lower at 10,339.70 and extended sell-off as the day progressed. It hit an intraday low of 10,249.60 in afternoon followed by a bit of recovery in last hour of trade. The index closed 149.50 points lower at 10,303.50.
"Nifty50 witnessed a gap down opening before signing off the session with 'Spinning Top' kind of formation as if it is confirming the reversal, with a follow through price action registered in last Wednesday's session," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
On weekly charts this sell off resulted in 'Bearish Engulfing' formation as current week's candle body completely covered the candle body of last week which appears to have negated the bullish connotations of preceding week's Hammer formation, he said.
He further said owing to back to back sharp corrections, a pull back can't be ruled out going forward in next session which ideally should be utilised to create fresh shorts. "On such a pull back move bulls shall face resistance as they enter into the bearish gap zone of 10,380–10,436 levels registered on Friday's session."
According to Mazhar, if bulls manage to push the indices beyond 10,450 levels on closing basis then the said relief rally can get extended upto 10,617 levels in next couple of sessions.
Contrary to this if indices breach 10,249 in next session itself then they shall retest the recent corrective swing lows of 10,138 levels, he said.
India VIX moved up by 10.05 percent at 19.78. Spurt in volatility after the dips of last few sessions suggests that upside could be restricted again in the market, experts said.
On option front, maximum Put open interest (OI) was at 10,000 followed by 10,200 strike while maximum Call OI was at 11,000 followed by 10,600 strikes. Meaningful Call writing was seen at 10,400 followed by 10,600 while Put writing was seen at 10,200 followed by 10,100 strike. Option band signifies a trading band between 10,200 to 10,500 zones.
"The Nifty formed a bearish candle on daily and weekly scale which suggests that Bears are holding tight grip in the market," Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.
Now till the index holds below 10,400 zones it could slip towards its crucial support of 10,200 then 10,138 mark while on the upside hurdle is seen at 10,450-10,500 zones, he feels.
Bank Nifty opened negative and traded in narrow range of 200 points for most part of the trading session. The index closed 102.80 points lower at 25,085.80.
"It formed a bearish candle on weekly scale which implies supply is visible at higher levels. However it took support at its rising trend line which is formed by connecting swing lows of 21,368, 23,605 and 24,678 and 24,922," Taparia said.
Now the index has to sustain and hold above 25,250 zones to witness a bounce towards 25,500 while a hold below same could drag it towards 24,900 then 24,650 zones, he added.
