Mazhar Mohammad said for the time being, upsides shall get capped around 11,760 where a potential double top can be expected if bulls are unable to breach the said level in next couple of trading sessions.
Nifty50 made its new high of 11,761 on April 3 morning, but wiped out all gains in last hour of trade. Traders turned cautious after Skymet forecast below normal monsoon. Market participants are also eyeing RBI interest rate decision due April 4.
The index closed below 11,700 and formed 'Bearish Engulfing' pattern after two Doji candles on daily scale.
A Bearish Engulfing Pattern consists of two candles. One candle is usually a small candle which is followed by a large black or red candlestick pattern that engulfs the short one or the previous candle.
A bearish candlestick pattern suggests that bears were able to regain control. It is usually seen as the end of an uptrend but if index breaks below its crucial support level of 11,550, selling pressure could accelerate, experts said.
The index also negated the formation of higher lows of last six trading sessions by slipping below previous day's low of 11,655 levels.
The Nifty50 started the day higher at 11,735.30 and hit a life high of 11,761, but gradual selling pressure in last hour of trade pushed the index lower to hit day's low of 11,629.15. It closed 69.20 points lower at 11,644.
"Inline with projections, weakness appears to be creeping in the indices as Nifty50 registered a Bearish Engulfing formation after meeting the formality of registering a new life time highs," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said in this process it has erased the laborious gains put up by bulls in last two sessions and also generated sell signals on lower time frame charts. "The said weakness shall get confirmed once Nifty closes below 11,630 levels which can further accentuate selling pressure in the broader markets."
In such a scenario he expects an initial target of 11,510 levels and breach of this shall eventually drag down the indices towards 11,300 levels.
Mazhar Mohammad said for the time being, upsides shall get capped around 11,760 where a potential double top can be expected if bulls are unable to breach the said level in next couple of trading sessions.
On Options front, maximum Put open interest (OI) is at 11,000 followed by 11,500 strike while maximum Call OI is at 12,000 followed by 11,800 strike.
Call writing is at 11,900 followed by 12,000 strike while Put writing is at 11,500 followed by 11,700 strike price.
Option band signifies a broader trading range in between 11,500 to 11,800 zones, experts said, adding VIX started to hold at higher levels so it requires a cool off to shifts its base to higher zones else volatile swing could start in the Indian market.
India VIX moved up by 3.89 percent to 18.78 levels.
"Overall, medium-term trend of the market is positive but formation of pause in positive momentum with negative divergence in RSI indicators suggests that some consolidation is required for a decisive move beyond life time high of 11,761 zones," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
It has immediate support near 11,550 while hurdles are placed at 11,760 zone and a decisive range breakout is required for next leg of rally, he added.
Bank Nifty got stuck in a range from last five sessions and failed to hold above 30,500-30,650 zones.
The index closed 260.95 points lower at 30,093.30 and formed a bearish candle on daily scale which suggests a test of immediate support zones, experts said.
"Now Bank Nifty has to respect immediate support of 29,888 zone to again attract buying interest towards 30,250 then 30,500 zones while next major support is seen at 29,750 zone," Chandan Taparia said.
