F&O: Nifty sees breakdown of Bearish Flag pattern, dashes hopes of rebound

By Chandan Taparia

Nifty50 failed to surpass Tuesday’s high and gradually drifted towards the 10,900 mark on Wednesday. It formed a bearish candle on the daily scale and has been forming lower highs and lows for past two sessions.

It has seen a breakdown from the Bearish Flag formation and dashed hopes of a bounceback. The index has been facing multiple hurdles in the 11,111 -11,180 zone for last three weeks and every bounce is getting sold. It has gone to the lower band in last seven sessions and as long as it holds below 11,000, fresh weakness can drag it towards the recent swing low in the 10,800- 10,780 zone, while on the upside hurdles are seen at 11,050 and then 11,111 levels.


On the options front, maximum Put open interest was at 11,000 followed by 10,800 levels, while maximum Call OI was at 11,000 followed by 11,500 levels. There was Call writing at 11,000 followed by 11,100 levels, while minor Put writing was seen at 10,600 and then 10,500 levels. Options data suggested a shift in lower trading range to 10,750-11,100 zone.

India VIX moved up 2.36 per cent to 17.02 level. Rising volatility is giving the bears a tight grip and putting sustained pressure at every bounce.

Bank Nifty is forming lower highs and lows for last two sessions and has corrected from 28,500 to 27,700 levels. It formed a bearish candle on the daily scale and is facing sustained selling pressure at higher levels. If it holds below 27,700, then it may drift towards 27,500 and then 27,350 levels, while on the upside a hurdle is seen at 28,000 and then 28,350 levels.

Nifty futures closed negative at 10,936 with a loss of 0.84 per cent. Long buildup was seen in Nestle, PVR, Just Dial and Concor while shorts were seen in Tata Motors, Arvind, Havells and Raymond.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)