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Technical View: Nifty forms bearish candle; remain cautiously optimistic on market

August 07
19:29 2018

The Nifty50 after opening higher extended gains further and hit a fresh intraday record high, but wiped out those gains in late morning deals to remain rangebound for rest of the session on Tuesday.

The index ended flat but at a fresh record closing high again. It formed a bearish candle on the daily charts as closing price is lower than the opening price.

The Sensex, however, ended 26.09 points lower at 37,665.80 and even the broader markets closed in the red with the Nifty Midcap index falling 0.3 percent. The sectoral trend was mixed.

The consolidation was warranted especially after the market had consistently been hitting fresh record  highs, experts said while advising bulls to remain cautiously optimistic on the market.

The Nifty50 after opening above 10,400 levels hit a fresh record high of 11,428.95 on intraday basis but erased gains in late morning deals to touch a day’s low of 11,359.70. Overall the index remained rangebound for major part of the session and managed to close in the green with 2.40-point gain at 11,389.50.

“It appears to be another day of consolidation on the bourses as Nift50 remained rangebound inside 70-point boundary before signing off the session with a bearish candle on intraday basis but interestingly remained mildly positive for last two trading sessions on closing price basis. This is clearly suggesting that traders are clueless at higher levels about the direction of the market,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

Hence only a decisive breakout above 11,500 levels shall instill more confidence among them owing to which they can march ahead for bigger targets, he said. “Till then bulls are advised to remain cautiously optimistic and to shift their focus on stock specific opportunities.”

On the down sides if indices trade below 11,359 in next session for atleast one hour then correction shall get extended initially towards 11,280, he feels.

India VIX fell by 0.13 percent at 12.54. Overall lower volatility suggests that bulls are likely to hold the market on declines, experts said.

On option front, maximum Put open interest (OI) was seen at 11,000 followed by 11,200 strike while maximum Call OI was at 11,500 followed by 11,400 strike. Put writing was seen at 11,400 followed by 11,200 strike whereas Call writing was seen at 11,500 followed by 11,600 strike.

“Nifty index opened positive but failed to surpass immediate hurdle of 10,435 and witnessed consolidation with the intraday support at 10,360-10,350 zones. It formed a small candle on daily scale which indicates that bulls and bears both are not ready to give up in the market,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Securities told Moneycontrol.

He said the index has been witnessing absence of buying interest while decline is also being bought in the market. “Now it has to continue to hold above 11,350 zones to extend its move towards 11,435 then 11,500 zones while on the downside major support is seen at 11,250 then 11,171 zones.

Bank Nifty formed an inside bar and a Harami Cross pattern on daily scale as it traded in a smaller range of 150 points for the entire session.

Now it has to hold above 27,750 zones to extend its move towards 28,000 then 28,250 zones while on the downside supports are seen at 27,650 then 27,440 zones, Taparia said.

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