The Nifty 50 has seen the formation of a bearish candlestick pattern on the daily (on Friday) as well as weekly charts, after breaking down strong support at 17,400-17,500 levels.
There was also a breakdown of the gap-up area of August 30, and of the 50-day exponential moving average (17,358). Hence, given the weak environment, the index may break its August lows at around 17,150 levels, followed by the 17,000 mark, in the coming days. The upside hurdle is expected to remain at 17,700-17,800 levels if there is a recovery, experts said.
"On the weekly chart, the Nifty formed a reasonable bear candle with a long upper shadow, which signals a sell-on-rise opportunity in the market. The downside momentum seems to have picked up as per the daily and weekly time frame charts," Nagaraj Shetti, Technical Research Analyst at HDFC Securities, said.
Hence, the present sharp weakness is likely to drag the Nifty down to 17,000-16,900 levels in the near term. Any pullback rally up to 17,500 levels could be a sell-on-rise opportunity for the next week, he said.
After a recent fall of more than 4 percent from around 18,100 levels, Options data indicated that there had been a downward shift in the broader trading range for the Nifty 50 to 16,800-17,800, while in the immediate term, the index could trade in a range of 17,000-17,600, experts said. The added that volatility was going to be high given the expiry week for September F&O contracts.
On the Options front, we have seen maximum Call open interest at 18,000 strike, followed by 19,000 and 18,500 strike, with the maximum Call writing at 17,500 strike, followed by 17,400, and 17,600 strikes.
The maximum Put open interest was seen at 16,000 strike, followed by 17,000 and 16,500 strikes, with the maximum Put writing at 16,800 strike, followed by 17,300 and 17,100 strikes.
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