Nifty50 Forms Long Bearish Candle
timesinternet.in ETMarkets.com: The Nifty50 failed to hold above its crucial psychological level of 8,800 on Wednesday and formed a long bearish candle on the daily candlestick chart.
The index closed below its opening level for the seventh consecutive day in a row, which suggests that the bulls are losing momentum and the bears are slowly making their way to get an upper hand on Dalal Street.
However, it still can’t be treated as a breakdown, because the Nifty50 respected its crucial support level of 8,720. However, a break below 8,720 this week can put further pressure on the bulls, which could take the index towards 8,650-8,620 levels, experts said.
The index did break below its 10-day simple moving average, which acted as a crucial support in last four out of seven sessions. The moving average is placed at 8,770 on the daily charts.
A bearish candle is formed when the closing value is below the open value of the candle, irrespective of how much the gap between the close and open level.
The Nifty50, which opened at 8,778, rose to an intraday high of 8,807, but the bears intensified selling pressure and pushed the index below the 8,800 level to close at 8,724.
“The RSI has given a sell signal by turning from its overbought state and now a followup buying below 8,720 level can push it towards 8,650 levels. On the upside, 8,800 and 8,820 levels may act as barriers over the next couple of sessions,” Chandan Taparia, associate vice-president, analyst - Derivatives at Motilal Oswal Securiti e s, told ETMarkets.com.
“The Nifty50 formed a negative or a bearish candle on chart, followed by an inside candle pattern. It has closed near its support trend line by connecting the lows of 8,685 and 8,715 levels,” he said.
However, this one day’s negative price action shall not be the beginning of short-term downtrend, as the Nifty50 is placed close to dual support levels around 8,700 level, experts said.
“If the Nifty50 breaches below its support at 8,700 on a closing basis, it will open up new downside targets for the index close to 8,500 level,” Mazhar Mohammad, chief strate gist-technical research and trading Advisory, Chartviewindia.in, told ETMarkets.com.
“For the time being, upsides shall remain capped around 8,800 level and the bulls need to get past 8,827 l e ve l to regain their strength,” it said. Mechanical indicators such as MACD and RSI have given a sell signal, as they have turned from the overbought state with the decline in the broader market.
“It failed to surpass its hurdles at the 8,820 level. Till it doesn’t surpass it, it would be tough for the bulls to get a grip on the market while holding below 8,720 and sell indication from mechanical indicators may give the bears a chance to grab the shorting opportunity,” Taparia said.
If the Nifty50 goes below its support at 8,700 on a closing basis, it will open up new downside targets for the index close to 8,500 level