Tech view: Nifty50 forms Bearish Engulfing Pattern, ends pullback




Upsides, if any, beyond the 9,988 level shall remain limited and traders should make use of them only to lighten up their long positions. NEW DELHI: Rising prospects of a direct confrontation between North Korea and the US after the former tested a Hydrogen bomb on Sunday spooked investor sentiment in equity markets the world over on Monday, and pulled the NSE barometer down after gains for three consecutive sessions.

The index formed a ‘Bearish Engulfing Pattern’ on the daily chart, hinting at the end of a pullback attempt, analysts said. That said, the pattern should not be studied in isolation. It needs to be seen after studying the preceding as well as the followup structure.

“The Nifty50 formed a Bearish Engulfing Pattern as it covered all the gains made in last three sessions. It needs to cross and hold above the 9,928 level to witness a bounce towards 9,980 and then 10,020 levels. Downside supports are seen at 9,850 and 9,820 levels,” said Chandan Taparia of Motilal Oswal Securities.

The index closed near its five-day, 13-day and 13-day moving averages, after somehow managing to close above the 9,900 mark amid heightened volatility.

The index opened on a higher note but soon witnessed selling pressure. It hit a low of 9,861 in line with the fall seen in other Asian markets. The index then recovered a bit to eventually close the day at 9,912, down 61.55 points, or 0.62 per cent.

“The candle’s body eclipsed the price range of the previous session, that too after retracing around 62 per cent of the entire fall from the highs of 10,137-9,685 levels, suggesting either limited upside or end of a pullback attempt. However, a long lower shadow appeared to be in line with larger corrective pattern indicating rangebound move between 10,000 and 9,700 levels,” said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in

Mohammad said if Monday’s high of 9,988 were to become the near-term top, traders should prepare themselves for retesting the 9,685 level within a short time.

“Upsides, if any, beyond the 9,988 level shall remain limited and traders should make use of them only to lighten up their long positions,” he said.




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