Technical View: Nifty forms bearish candle, 11,000 crucial support level

The Nifty50 erased most morning gains and closed moderately lower on September 23, ahead of expiry of September futures & options contracts on September 24, weighed by telecom, metals and select banking & financial stocks. Buying in Reliance Industries, Axis Bank, HDFC Bank, HUL and Infosys helped indices cover the losses.

The index fell for fifth consecutive session and formed bearish candle on the daily charts as closing was lower than opening levels.

Experts see deep correction in the market, if Nifty50 decisively breaks psychological 11,000 mark in coming sessions.

For the time being, Mazhar Mohammad of Chartviewindia.in advised traders to remain neutral on index, especially on short side trade unless Nifty50 closes below 11,000 levels in next session.

The Nifty50 rebounded in the opening at 11,258.75 and touched an intraday high of 11,259.55, but wiped out all gains in afternoon and hit a day's low of 11,024.40. The index closed 21.80 points lower at 11,131.90.

"Nifty50 appears to have chalked out a well defined downsloping channel with last 17 sessions of corrective swing which is in progress from the highs of 11,794 levels. In line with this at Wednesday's intraday low of 11,024 levels the said index appears to have tested the lower end of the said channel and recouped around 100 points of intraday losses from the said intraday lows," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

On the expiry session if bulls manage to defend the low of 11,024 levels then sideways move with positive bias can be expected for next couple of trading sessions, he said, adding however, unless Nifty50 registers a sustainable close above the near term critical resistance zone of 11,294 – 11,309 levels, strong rally in the Nifty shall not be expected.

Mazhar Mohammad feels if Nifty closes below 11,000 levels then traders should be ready for a bigger cut with initial target placed around 10,800 levels.

India VIX dropped by 1.96 percent from 21.41 to 20.99 levels. Cool down in volatility even after weakness in market indicates that some sort of rangebound move along with capped upside could be seen for next coming sessions, Chandan Taparia of Motilal Oswal said.

Option data suggested that the trading range for Nifty has been narrowed to 11,000-11,350 levels for coming sessions, against 11,000-11,500 levels earlier.

On option front, maximum Put open interest was at 11,000 followed by 10,500 strike, while maximum Call open interest was at 11,300 followed by 11,500 strike. Call writing was seen at 11,200 then 11,300 strike while Put writing was seen at 11,000 then 10,950 strike.

Bank Nifty continued its weakness for fifth consecutive session and drifted towards 20,800 levels today. The index closed 39.40 points higher at 21,178.50 and formed a bearish candle on daily scale.

"Resistances are gradually shifting lower with the formation of lower top - lower bottom on daily scale. It broke a key support of 21,000 during the day but managed to close above the same led by some bounce in last hour of the session," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.

"Now if the Bank Nifty holds below 21,000 level, then it could continue the weakness towards 20,800 then 20,500 while hurdles exist at 21,500 then 21,750," he said.

Positive setup was seen in Tata Chemicals, Bata India, Ramco Cement, Apollo Hospitals, Vedanta and Escorts while weakness was seen in Bharti Infratel, Shriram Transport, LIC Housing Finance, ZEE Entertainment, Tata Steel, Motherson Sumi, IndusInd Bank, BHEL, Tata Consumer, Indiabulls Housing Finance, Marico and Bajaj Finance, he added.