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NEW DELHI: The Nifty50 dropped to its lowest level in three months on Wednesday and in the process formed a be arish candle on the daily chart. It could not touch the 11,000 level throughout the session.

Chances of the index drifting lower are higher, while the upside looks largely capped at 11,045 level, which is its 100-day moving averages. The 10,800 level could emerge as key support for the index.

The index witnessed a monthly breakout failure, which resulted in selling pressure, said Sahaj Agrawal, Vice-President for derivatives at Kotak Securities. The expert sees resistance for the index in the 11,000-11,100 range.

For the day, the index fell 150.05 points, or 1.36 per cent, to 10,858. Daily strength indicator RSI and momentum indicator Stochastic are in bearish mode, which suggests weakness ahead.

“The index formed a sizable bearish candle, but remained restricted within the high-low range of the previous session, indicating lack of strength on either side. The index is facing stiff resistance around its 100-day SMA (11,045), which remains a crucial resistance zone. On the downside, an immediate intraday support exists around 1,0830,” said Rajesh Palviya of Axis Securities.

On the hourly charts, the index has the potential to form an Ending Diagonal pattern, said Gaurav Ratnaparkhi of Sharekhan.

The 10,815 level is 78.6 per cent retracement of the July–August rally and 10,800, the lower end of the pattern, shall be a key level to watch, which will decide the future course of action for the market, Ratnaparkhi said.

Chandan Taparia of Motilal Oswal Securities said the index traded in the deep oversold territory, as it failed to surpass the resistances, causing selling pressure.

“Any rise from the lows of 10,800-750 in next 1-2 sessions could offer an opportunity to sell on rise,” said Nagaraj Shetti of HDFC Securities.

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