Nifty extended its southward journey for the fourth straight session on Tuesday and ended the session below 11,200 mark.
The price action of the day formed a bearish candle, which resembles a ‘belt hold’ pattern. Nifty broke down the upward channel and closed below the prior swing low of 11,185. This is the first sign of trend reversal. After closing below the 50-DMA on Monday, Nifty now has moved 1.15 per cent away from the 50-DMA. Also, Nifty formed a lower top and a lower low, which is a sign for the downtrend as per Dow Theory. Even though it breached 11,111 on an intraday basis, it protected this level on a closing basis.
Going ahead, Tuesday's low of 11,085 will be a critical level for now as the price action of the past 16 trading sessions has taken the form of a descending channel with support placed around 11,085 levels. A move below the level of 11,085 would open gates for a further correction towards levels of 10,900-10,880. On the upside, the level of 11,250 is likely to act as immediate resistance and a move above this level could take the index towards the level of 11,300.
Overall, the level of 11,085 is a crucial support for the index while, on the upside, the level of 11,250 is likely to act as a resistance.
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