Positional traders should short rallies in the 11,790–11,850 zone and look for a bigger target of 11,520 with a stop above 11,900 on a closing basis.
The Nifty50 wiped out almost all
last week gains and closed below 11, 800 on October 26 as a correction was seen
across sectors barring FMCG, which ended flat. The rising coronavirus
infections in the US and Europe along with a delay in the American stimulus
package dented sentiment.
After opening flat at 11,937.40,
the Nifty50 hit an intraday high of 11,942.85 but immediately slipped to touch
the day's low of 11,711.70. The index closed at 11,767.80, down 162.60 points
or 1.36 percent.
The index formed a large bearish candle on the daily charts as closing was much lower than opening levels. More than two shares declined for every share rising on the NSE. The Nifty midcap and smallcap indices were down 1.7 percent and 1 percent.
The selling pressure amid volatility
may continue if the index breaks its recent corrective swing low of 11,661,
experts said.
For the time, positional traders
should short rallies into 11,790 -11,850 zone and look for a bigger target of
11,520 with a stop above 11,900 on a closing basis, Mazhar Mohammad, Chief
Strategist – Technical Research & Trading Advisory at Chartviewindia.in
told Moneycontrol.
"The Nifty50 appears to have
resumed its downswing as it witnessed almost a 230 points fall from intraday
high 11,942 to 11,711 levels which depicted a large bearish candle that
eclipsed preceding 5 trading sessions of price action," Mohammad said.
The advance decline ratio also
strongly favoured the bears as two stocks declined for a single stock that
closed in positive terrain, hinting at a strong bearish undercurrent, he said.
It looked inevitable that the
Nifty would breach the recent corrective swing low of 11,661 levels, he said.
In that scenario, meaningful support is available at only around 11,500 in the
form of 50-day simple moving average, he said.
India VIX moved up by 4.6 percent
from 21.82 to 22.83 levels.
On the options front, maximum Put
open interest was at 10,500 followed by 11,000 strike, while maximum Call open
interest was at 12,500 followed by 12,000 strike. Call writing was seen at
11,900 then 12,000 strike while Put writing was seen at 11,700 then 11,400
strike.
The options data indicated that
the Nifty could see a wider trading range of 11,500-12,000.
The Bank Nifty failed to hold
24,500 and drifted towards 23,850. It ended the day with a loss of 402.80 points
at 24,075.50 and remained negative for the third consecutive session.
The index formed a bearish candle
on the daily scale and negated its higher low formation after six consecutive
sessions.
"Till the Bank Nifty remains
below the 24,500-mark, weakness could be seen towards next support at 23,750
then 23,500 levels while upside key hurdle is seen at 24,750," Chandan
Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial
Services said.
Positive setup was seen in Nestle
India, Kotak Mahindra Bank, Power Grid, HUL and HDFC while weakness was seen in
Hero MotoCorp, Bajaj Auto, Hindalco Industries, Zee Entertainment, PVR, UPL,
TVS Motor, Reliance Industries, Lupin and Sun TV Network, he added.
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