Technical View: Nifty forms bearish candle, steep fall ahead if index breaks 8,555

The Nifty squandered all its day’s gains in the last one hour of trade to close below the psychologically important 9,000-mark on March 17, as global markets continued to stumble on the coronavirus pandemic fear.

The high volatility shows that the recent measures taken by central banks have been failed to calm investors, as coronavirus infections rise rapidly in Europe and the United States.

The index continued to correct for the second consecutive session and formed a bearish candle on daily charts, as it closed far below the opening level. Major selloff was seen in private banks and IT stocks.

Experts expect the downside to continue in the coming days and if the index breaks its crucial support of 8,555, then there could be a steep fall.

The Nifty opened higher at 9,285.40 and hit the day's high of 9,403.80 but found itself in a bear hug in late trade. The index closed at 8,967.05, down 230.35 points or 2.50 percent.

"Markets across the globe continued their brutal selloff as the Nifty took 'u-turn' in the post-luncheon session by giving up all its intraday gains from the day’s high of 9,403. In this process, it appears to have decisively closed below its psychological support of 9,000-mark," Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

If the bulls fail to recover and manage a sustainable close in the next one or two trading sessions, then the Nifty can initially head to retest recent lows of 8,555, he said.

But, if the market continues to fall, as being suggested by its unpredictable but high velocity on the downside, then one should prepare to see much lower levels, with logical targets present around 7,946, Mohammad said.

Considering indiscriminate selling across the board, including in blue-chip counters, investors should wait for some prolonged consolidation phase at lower levels, Mohammad said.

The Indian market will continue to follow global cues, therefore further downside cannot be ruled out in the near term, said Ajit Mishra, VP-Research at Religare Broking.

Market participants should avoid risky bets and start investing in a phased manner, Mishra said.

The Bank Nifty corrected more than 4 percent and formed a bearish candle on daily charts. So far, recoveries have been very fragile and moves have not sustained at all.

"The recent low of 21,350 is important from bulls’ perspective for any recovery to materialise. The overall broader trend has been severely fractured and it will take a long time for the damage to be repaired," Amit Shah, Technical Research Analyst at Indiabulls Securities, said.

He said the Bank Nifty is likely to face stiff resistance on the way up towards 23,500, while the support is placed at 21,350-20,750.