Bearish Belt Hold | Ideal Stock
The Nifty Index broke a crucial support at 10,700 level on Wednesday and ended up forming a 'Bearish Belt Hold' pattern on the daily chart.
The index option violated the support at the 20- and 50-day SMAs, signalling a negative bias, as traders braced for Future & Option Tips expiry-induced volatility on Thursday.
The index closed below its 50-DMA at 10,694 for the first time since May 23 as the bears regained control, said Aditya Agarwala, Technical Analyst at YES Securities. The expert said any trade below 10,650 will trigger a breakdown from a trendline support, which can drag the Index lower. Next important support to watch out would be the 100-DMA and 200-SMA, which are placed at 10,542 and 10,445 levels, respectively.
For the day, the index fell 97.75 points, or 0.91 per cent, to close at 10,671.
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"We observe a downside breakout of the sideways range movement at 10,700 level, and also the upward sloping support trend line. After declining below key multiple supports, the underlying short-term trend of Nifty has turned negative. The next lower level to be watched is at 10,560,” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
Rajesh Palviya, Head Technical & Derivatives Analyst at Axis Securities, said the index has negated last five weeks’ up-sloping trendline at 10,750 level. As indicators RSI and Stochastic are quoting below the 50-mark, it supports a downward momentum ahead and selloff on pullbacks, he said.
A Bearish Belt Hold pattern on the daily scale indicates that the bears are getting a grip on the market, as they were unable to surpass multiple hurdles in the 10,800-10,835 zone, said Chandan Taparia of Motilal Oswal Securities.
Any bounceback from the 50-DMA on the expiry day may bring some relief to the bulls. "Below that level, selling pressure can only intensify, as all stops on the positional longs may get triggered, with the near-term target placed below 10,400 level on the Nifty50. The bulls may not regain strength unless the Nifty option index closes above 10,800 level,” said Mazhar Mohammad of Chartviewindia.in.
