Nifty forms Bearish Belt Hold; history signals rebound ahead

NEW DELHI: The Nifty50 on Thursday declined throughout the session, but managed to hold above the 10,000 mark at the end.

In the process, the index formed a ‘Bearish Belt Hold’ pattern on the technical charts for the second consecutive day. Since its June lows, such corrections in the Nifty50 have not lasted beyond two days. But the index needs to hold above the 9,985 level to avoid any weakness in the ongoing trend.

The day’s opening level of 10,081 proved the intraday high for the Nifty50. The NSE barometer drifted lower as the session progressed. At one point, it fell below the 10,000 mark to hit a low of 9,998, before closing the day at 10,081, down 0.67 per cent.

The index broke the 11-day ascending channel with multiple touch points on lower time frame charts, said Mazhar Mohammad of Chartviewindia.in, who believes the breach has projected the downside target close to the 9,916 level.

“Our twin momentum oscillators are in the sell mode, which usually suggest extension of the correction for a couple of sessions. However, from the June lows of 9,448 level, such corrections in the index have not lasted beyond two sessions. The index is trading close to its 13-day EMA, where it reversed its course of correction on a couple of occasions in the past. We believe the short-term trend should get reversed, if index closes below it next trading session,” Mohammad said.

The 13-day EMA was placed at the 9,985 level as of Thursday’s close.

Chandan Taparia of Motilal Oswal Securities said the Nifty50 formed a ‘Bearish Belt Hold’ on the daily chart.

A ‘Bearish Belt Hold’ pattern is formed when the opening price becomes the highest point of the trading session (intraday high), leaving no upper shadow, which is then followed by declines through the day, forming a large body and a small lower shadow.

“It has broken its rising support trend line by connecting the recent swing lows of 9,543, 9,646, 9,838 and 9,944 levels. Now if it sustains below the 10,050 level, then profit booking could continue towards the 9,950-9,928 zone. Upside hurdles are placed at 10,080, and then 10,120 level,” Taparia said.

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