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Tech view: Nifty forms a Falling Window, signals weakness ahead

A Falling Window implies potentially, the weakness might persist in the next session.

Aug 13, 2018, 06.02 PM IST
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A Falling Window implies potentially, the weakness might persist in the next session.
NSE benchmark Nifty kicked off a holiday-shortened week on a feeble note on Monday, as technical charts signalled overbought condition and global cues remained subdued.

Before closing 73.75 points down at 11,355, the 50-share index shuttled between 11,340 and 11,406 levels. During the process, the index formed a Falling Window, which means a downside gap on the charts.

A Falling Window implies potentially, the weakness might persist in the next session, though it would need confirmation, said Milan Vaishnav, Technical Analyst, Gemstone Equity Research and Advisory.

“If the Nifty50 continues to remain under corrective pressure, it has nearest support at its short-term 20-DMA. With a mildly tepid trade expected on Tuesday, we expect this broad range-bound consolidation to continue in immediate near term,” Vaishnav said.

Momentum indicator moving average convergence divergence, or MACD, on Monday signalled a bearish crossovers on 117 counters on NSE. Some of the stocks on the list included Punjab National Bank, Indian Oil Corporation, India Cements, Bank of India, Andhra Bank and HPCL.

Mazhar Mohammad, Chief Strategist-Technical Research & Trading Advisory,, said: “This selloff resulted in the breach of a critical support available in the form of 9-day EMA, which offered support to the Nifty50 during corrections in this leg of the upward move from the low of 10,550, suggesting the possibility of significant weakness going ahead.”

On the options front, maximum Put open interest (OI) was at 11,000 followed by 11,200, while maximum Call OI was at 11,500, followed by 11,400. There was fresh Call writing at 11,500 and 11,400 levels while marginal Put writing was seen at 11,200.

India VIX moved up 4.08 per cent to 13.3750. “A spurt in VIX suggested that the upside is going to be capped on an immediate basis,” said Chandan Taparia, analyst, Motilal Oswal Financial Services.
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