Tech View: Nifty50 forms big bearish candle, market may move southward

NEW DELHI: Nifty50 on Monday extended losses to the second consecutive day and formed another big bearish candle on the daily chart. In the process, the index violated its multiple day support level of 14,350, indicating a negative bias.

Nifty50 closed at 14,281.30, down 152.40 points or 1.06 per cent. The index hit a low of 14,222.80 and a high of 14,459.15 during the day.

“The index continues to move in a lower top and lower bottom formation on the hourly chart, indicating a negative bias. The chart pattern suggests that if Nifty crosses and sustains above 14,300, it would witness buying which would lead the index towards 14,400-14,500. However, if the index breaks below 14,200, it would witness selling which would take the index towards 14,100-14,000,” said Rajesh Palviya of Axis Securities.

He added that Nifty is trading above its 20-day SMA that indicates a positive bias in the short term. Hence, he suggests buying on dips.

Check out the candlestick formations in the latest trading sessions

Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, believes bears appears to be slowly tightening their grip on the market as intraday recovery towards 14,400 had huge selling pressure in the afternoon session.

Unlike Palvia, Mohammad believes the trajectory of this market might have shifted from buy on dips to sell on rallies. Therefore, stability in the index should not be expected unless it closes above 14,459, he added.

“As the index is down by 400 points in the last two trading sessions, some sideways consolidation should be expected in the next session unless it breaches 14,222. If 14,222 is violated then the slide shall get extended towards 14,100, whereas a bounce towards 14,400 can be an opportunity to initiate fresh shorts for bigger targets placed in the zone of 13,950–13,800,” said Mohammad.

India VIX, the measure of volatility in the market, rose for another session and added 1.6 per cent to end at 24.39 per cent. The fear gauge is at its highest level in nearly three months.

Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments, underlined that the market has become volatile and strict stop losses must be placed on all trades.

“We have broken the crucial support of 14,350 and should ideally be headed further south to levels closer to 14,150 and then 14,000. 14,500 has become a resistance zone and any rally up can be utilized to short the Nifty for lower targets,” he said.