Breach of the recent low of 10,138, though on intraday basis, suggests that the index has started next leg of the larger decline & the possibility of a larger pullback can be ruled out, experts said.
The market continued to see selling pressure for fourth consecutive session on Tuesday. The Nifty50 after sharp gap down opening traded lower throughout the day to hit nearly seven-month low amid weak global cues and rupee volatility.
The index made small bullish candle and formed 'Long Legged Doji' pattern on the daily charts.
A typical long-legged Doji pattern is formed when the opening price is almost equal to the closing price but there was a lot of intraday movement on either side.
Breach of the recent low of 10,138, though on intraday basis, suggests that the index has started next leg of the larger decline & the possibility of a larger pullback can be ruled out, experts said.
The Nifty50 opened with 100 points gap down at 10,152.60 and extended losses in second half of the session to hit an intraday low of 10,102.35. The index managed to recover some losses in late trade but still closed 98.50 points lower at 10,146.80.
"Nifty50 registered a Long Legged Doji kind of formation as it witnessed a gap down opening but closed the session almost around the same point where it opened the day. This kind of indecisive formation after breaching critical support of 10,138 is pointing clueless nature of the bears about further direction on the downside," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said intraday price action is looking like a bear trap as Nifty50 appears to have witnessed decent amount of buying after recording a new corrective swing low around 10,100 levels.
However, a follow through buying in next session, above 10245 levels, is required to confirm the strength on further upsides which may then set the stage for more short covering as markets head towards expiry session, according to him.
On the downsides, Mazhar said 10,100 shall remain a critical support here after breach of which shall drag down the indices initially to 9,950 levels. If pull back rally materialises from 10,100 levels then it may eventually get extended upto 10,400 levels, he added.
India VIX fell sharply by 10.87 percent at 19.03. During the session volatility index made a high of 22.35 and witnessed a cool off even after the overall weakness in Nifty index which suggests an early sign of consolidation in the market. However VIX has to go down below 17-16 zones to rescue the bulls after the sharp cut of last two months, experts said.
Gaurav Ratnaparkhi, Senior Technical Analyst at Sharekhan by BNP Paribas said in terms of the wave structure, Nifty seems to have started next set of Impulse on the downside. "Thus the Nifty now looks poised to test the March low of 9,952 with possibility to slide down to 9,700 in next few weeks."
Any bounce hereon can be treated as an opportunity to initiate short position, he advised.
On option front, maximum Put open interest (OI) was at 10,000 followed by 10,100 strike while meaningful Call OI congestion was at 10,500 followed by 10,400 strikes. Call writing was seen at 10,200 followed by 10,300 strike while Put unwinding was seen at all immediate strike price. Option band signifies an immediate trading range between 10,000 to 10,350 zones.
"The index has recently corrected by over 600 points from swing high of 10,760 to 10102 levels. Immediate trend is in pressure but if it manages to cross and hold above 10,200 zones then a bounce could be seen towards 10,250 and 10,333 levels while a hold below 10,138 could open the further decline towards 10,000-9,952 zones," Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.
Bank Nifty opened negative but managed to hold its opening lows and recovered by around 200-250 points from lower levels. It closed negative but formed a small bullish candle as closed higher than its opening levels. The index closed 106.15 points lower at 24,972.45.
Chandan Taparia said Bank Nifty has been resilience for most part of the month as Nifty is down by 7 percent while Bank Nifty is almost flattish on month on month basis.
Now Bank Nifty has to hold above 25,000 zones to witness a bounce towards 25,250 then 25,500 levels while supports are seen at 24,750 and 24,650 levels, he added.
