Technical View: Nifty forms small bearish candle on weekly charts, needs to hold 14,425


The Nifty50 started the day on a strong note after a steep correction in the previous two sessions and closed more than a percent higher on March 26, driven by buying and short-covering across sectors.

The index formed a Doji pattern on the daily charts as the closing was near its opening levels. However, for the week, it lost 1.6 percent and formed a small bearish candle on the weekly scale as the closing was lower than opening levels.

A Doji candle indicates indecisiveness among the bulls and the bears and bounces were being sold in the absence of follow-up buying interest. Experts say the index needs to hold 14,425 to avoid bigger cuts for coming sessions.

The Nifty50 opened sharply higher at 14,506.30 amid volatility and hit an intraday high of 14,572.90 before signing off the session at 14,507.30, up 182.40 points or 1.27 percent.

Considering a weak setup, traders should wait for some more consolidation before initiating trade on the long side, said Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia. Intraday shorting can be considered if the index slips below 14,400 levels for a modest target of 14,300, he said.

“The Nifty50 witnessed a sharp bounce, perhaps owing to oversold levels, which almost erased the preceding session’s losses but bulls, in a way, failed to capitalise further on strong opening without any incremental intraday gains, which resulted in a Doji formation on daily charts, whereas aa small bearish candle for the second consecutive week is registered on weekly charts,” Mohammad said.

Despite the day’s strong upmove, none of the main momentum oscillators turned into buy mode on daily charts, whereas multiple technical parameters on weekly charts turned into sell mode, he said. The only solace for bulls appears to be that the Nifty is consistently gaining support from its 13-week exponential moving average on weekly charts, whose value for next week is placed around 14,425 levels, he said.

Hence, sustaining above this level—14,425—on the weekly closing basis is critical for the bulls to avoid bigger cuts, Mohammad said .

If the bulls manage to push the index beyond 14,573 in the next session, the Nifty can test its 20-day EMA at 14,756. On the downside, 14,414 will be an important support point, he said. “If the index closes below 14,414 levels, then it can resume the weakness with initial targets placed around 14,264 levels,” Mohammad said.

India VIX fell by 9.03 percent from 22.69 to 20.65 levels. Options data indicated that the Nifty could see an immediate trading range of 14,000-14,200 to 14,800-15,000 levels.

Since it is the beginning of new series, the options data is scattered at different strikes. On the options front, maximum Put open interest was seen at 14,000 followed by 13,500 strike, while maximum Call open interest was seen at 15,000 followed by 16,000 strike.

The Bank Nifty opened gap-up at 33,605.05 but continued moving sideways throughout the day. It breached the previous day’s high but could not hold above the 33,500 zone and drifted below 33,200. Finally, it managed to close with gains of 311.80 points at 33,318.20.

It formed a Bearish Belt Hold candle on the daily scale but the weekly structure continues to be negative. “Now the Bank Nifty has to hold above 33,500, to witness an upmove towards 34,000 and 34,500, while on the downside, the support is seen at 33,000 and 32,500 levels,” Chandan Taparia, Vice President | Retail-Research at Motilal Oswal Financial Services told Moneycontrol.

On the stocks front, a bullish setup was seen in Container Corporation, SAIL, Tata Steel, Godrej Consumer Products, Jindal Steel, Asian Paints, Titan Company, Shriram Transport Finance, Berger Paints, Balkrishna Industries, NALCO, Cholamandalam Investment, HDFC, Tata Consumer Products, Grasim, Pidilite Industries and Vedanta. Weakness was seen in InterGlobe Aviation, UPL, PVR, Lupin and Indus Towers, he added.