Technical View | Nifty forms Bearish Engulfing pattern, 17,650 vital for upside

The Nifty remained under pressure throughout the session and erased the gains of the previous two days to end almost a percent lower on March 9.

Traders turned cautious after the US Federal Reserve’s talk of further rate hikes to tame inflation added to fears of slowing growth.

After opening higher at 17,772, the index drifted lower and remained in a downtrend. It fell to the day’s low of 17,574 in late trade and settled at 17,590, down 165 points.

The index formed a long bearish candlestick, which resembled the Bearish Engulfing pattern, on the daily charts, indicating the bears ruled the street.

The Bearish Engulfing pattern has two candlesticks. The first is green and the second red. The red candle completely engulfs the body of the first green candlestick.

The index closed a tad above its 200-day exponential moving average (17,585), which can act as a support on a closing basis. The next crucial support is expected to be at 17,400, while the 17,650-17,800 area would be the resistance, experts said.

“Technically, on daily charts, the Nifty has formed a long bearish candle, which supports further weakness from the current levels. For the bulls, 17,650 would act as an immediate resistance zone. Below the same, the index can slip till 17,500-17,450,” Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said.

Above 17,650, a minor intraday rally to 17,700-17,750 was possible.

On the Options front, the maximum weekly Call open interest was at 17,700 strike, which is expected to remain a crucial resistance area for the Nifty followed by 17,600 strike, with Call writing at 17,600 strike then 17,700 strike and Call unwinding at 17,800 and 17,900 strikes.

On the Put side, the maximum open interest was at 17,600 strike, followed by 17,400 and 17,500 strikes, with writing at 16,900 strike, and unwinding at 17,700 strike, followed by 17,500 and 17,200 strikes.

“Currently, traders are going into next week’s expiry with short Call positions of 17,700, which has also the highest open interest for next week’s expiry,” Rahul Ghose, Founder & CEO, Hedged, said.

The Nifty is still in a broad sideways range, with 17,250 the bottom and 18,040 the upper end of the range. “Until these levels get taken out, we expect to see up and down moves in this 800-point range,” he said.

Banking index

The Bank Nifty closed 320 points lower at 41,257, forming a bearish candlestick on the daily chart, taking support at 100 EMA (41,198).

“The index is stuck in a broad range between 41,000 and 42,000 levels and a break on either side will set the direction,” Kunal Shah, Senior Technical & Derivatives Analyst, LKP Securities, said.

The immediate support for the index is at 41,200 and the upside hurdle at 41,800. Traders should play on both sides as long as the index trades in the mentioned zone, he said.

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