Technical View: Nifty forms large bearish candle on election results day, 11,614 crucial

Nifty opened strong and crossed a new milestone of 12,000 to hit a record high intraday, but failed to hold on to those gains and ended sharply lower on May 23. It was despite general elections results indicated Modi-led National Democratic Alliance coming back to power.

The index lost 244 points from its opening levels and formed large bearish candle on the daily charts.

The kind of consolidation in the second half and loss of 384 points from record high indicate that top is in place and there could be some rangebound move in coming sessions, experts said.

Nifty after opening sharply higher at 11,901.30 extended its lead and hit an all-time high of 12,041.15, but gradually entered into consolidation as the day progressed and slipped into red in late trade to hit an intraday low of 11,614.50.

The index posted the biggest intra-day fall in the last 11 years and closed 80.90 points lower at 11,657.

India VIX fell sharply by 29.77 percent to 19.04. India VIX made a new record high of 30.18 on May 22 and fell drastically post the election result. Now VIX has to cool down below 16 to get the short term stability in the market.

"Nifty witnessed a wild swing of around 400 points intraday before signing off the session with a large bear candle as it reversed all its gains. This kind of price behaviour is clearly suggesting that a short term top is in place around 12,041. Hence, in the next session if it slips below 11,614 then it may eventually make an attempt to bridge the bullish gap present in the zone of 11,591–11,426," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said, however, as long as Nifty sustains above 11,400, corrections into the said gap zone, preferably around 11,500, can be considered as an opportunity to go long with a stop below 11,400 on closing.

In the near term, any attempt to rally towards 11,850–11,900 can attract selling pressure, he added.

Nifty options: Maximum Put open interest (OI) was at 11,000 followed by 10,500 while maximum Call OI was at 12,000 followed by 12,500.

Marginal Call and Put writing activities were seen in the market.

"Now, Nifty has to respect its multiple support of 11,550 to regain strength towards 11,761, then 11,888 while below 11,550 weakness could be seen with a change in price set up in the market," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Bank Nifty opened positive and made a life-time high of 31,705 but failed to hold its gains and corrected around 1,400 points from its higher levels.

Nifty Bank fell 1,296 points from its record high to post the biggest intra-day fall. The index closed 117.70 points lower at 30,409.10 and formed a bearish candle but managed to continue its formation of higher lows for the fifth consecutive session.