The Nifty50 dropped for the third session in a row on Wednesday to close a tad above the 9,900 level. The index started forming lower tops and lower bottoms, while it may have also formed a ‘Head & Shoulder’ pattern on the daily charts. This signals more correction ahead, probably towards the 9,800 mark in the near term.
On Wednesday, the Nifty50 tumbled as soon as the opening bell rang. At no point during the session did the index enter the positive terrain. The 50-pack index closed the day at 9,908, down 70.50 points, or 0.71 %.
Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory, Chartviewindia.in, said any follow-through selloff on Thursday could eventually drag the index towards its 50-day moving average placed around the 9,768 level.
Mazhar advised traders to avoid buying on dips for the time being as they would be better off waiting for some initial signs of strength.
Sacchitanand Uttekar, AVP, Technicals (Equity), Tradebulls, said that a Head & Shoulder formation seems to have emerged on the daily charts.
“The index registered consecutive firm close below its neckline. The pattern indicates a target up to 9,800. A follow-through move below 9,800 could amplify the bearish momentum. As we expect the seasonality effect to be sip in during the current series, participants are advised to book profit where possible and wait for this corrective wave to pass,” Utekar said.
Sameet Chavan of Angel Broking advised investors to use any bounce back towards 9,960-9,990 zone to move out of existing positions. “This corrective move is likely to extend towards the 9,870-9,820 zone,” he said.
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