Tech View: Nifty forms a ‘Long Black Day’, may have begun next down leg

NEW DELHI: Nifty50 resumed its downtrend on Tuesday, as traders turned cautious after the bulls failed to take out a key resistance at 11,170. The index formed a ‘Long Black Day’ on the daily chart, and the short-term outlook for the index turned negative.

For the day, the index fell 183 points, or 1.65 per cent, to shut shop at 10,925.

“The index failed to cross its 200-DMA at 11,170, leading to a massive decline. A sustained trade below 10,900 level will trigger a breakdown from a Bear Flag pattern, dragging it lower to 10,780 and 10,700 levels. On the flip side, a sustained trade above 10,900 can trigger a short-covering rally to 11,060-11,140 levels,” said Aditya Agarwala of YES Securities.

The internals of the index remain weak, with the near-term oscillators losing most of their bullish momentum, said Arun Kumar, Market Strategist, Reliance Securities.

“The index could retest its recent swing low of 10,782 initially and any incremental selling pressure could make Nifty test the support zone at 10,500-10,600,” he said.

“On the hourly chart, the trendline has been acting as a stiff barrier for the last couple of sessions while the index appeared to have completed the Three Wave pullback at the Friday’s high of 11,181,” said Gaurav Ratnaparkhi of Sharekhan.

“The index seems to have started the next down leg. Going ahead, the recent low of 10,782 will be on the bears’ radar, below which Nifty can roll towards 10,455, which is the 78.6 per cent retracement of the October-June rally,” he said.