A ‘Bearish Belt Hold’ pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day making up for the large body.
Indian market saw profit booking after rising for 5 out of 6 trading sessions ahead of the big event, ‘Budget 2018’. The index formed a Bearish Belt Hold kind of pattern on the daily candlestick charts which suggest caution for traders.
The index formed a Bearish Belt Hold kind of pattern after a small bullish candle which suggests that the momentum is slowing down. Investors should tread with caution in the run-up to the budget and maintain a strict stop loss below 10896.
A ‘Bearish Belt Hold’ pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day making up for the large body. The candle will either have a small or no upper shadow and small lower shadow.
In Tuesday’s price action, Nifty50 opened at 11,120.85 and rose marginally to 11,121.10. The bears took control of D-Street in morning trade and pushed the index below its 5-days exponential moving average (DEMA). The Nifty slipped to an intraday low of 11,033 before it closing 80 points lower at 11,049.65.
“The Nifty formed a Bearish Belt Hold candle on the Daily chart and closed the session with the loss of around 80 points. It wiped out the gains of last three sessions but still holding above psychological 11000 mark,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“Now, Nifty has to cross and hold above 11111 zones to extend its move towards 11170 then 11250 levels while on the downside support exists at 10990 then 10888 levels,” he said.
India VIX fell down by 8.24 percent at 16.41. The sudden decline in VIX has hurt the option premium ahead of Union Budget. However, if VIX cools down then it would be a positive sign for the market to hold the lower supports, suggest experts.
On the options front, maximum Put open interest was seen at 10500 followed by 11000 and 10800 strikes while maximum Call OI is at 12000 followed by 11500 and 11000 strikes.
Fresh Call and Put writing was seen at all immediate strikes which are not giving any sense of a decisive move in the market ahead of Budget.
“This kind of correction appears to be quite common ahead of major economic event as Nifty50 registered a bearish candle owing to profit booking. As of now all critical support points on short-term charts are intact a range bound session can be expected in next trading session,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“However, a close below 11000 levels may drag down the indices towards its critical support point of 10896 breaches of which on closing basis shall reverse short-term uptrend,” he said.
Mohammad further added that in between support can be expected in the gap zone of 10994 – 975 levels registered on 23rd of January. For resumption of upward momentum Nifty50 need to decisively close above 11190 levels.