Technical View: Nifty forms bearish candle, 14,900 crucial for rebound towards 15,100


The Nifty50, after a two-day rally, found itself in a bear trap and remained under selling pressure throughout the last session of the financial year 2020-21, as weak global cues weighed on the sentiment on March 31.

After opening lower at 14,811.85, the Nifty traded in a range of 14,813.75-14,670.25 with a negative bias. It ended the day at 14,690.70, down 154.40 points or 1.04 percent.

The index formed a bearish candle on the daily charts as the closing was lower than opening levels. Experts expect the index to remain rangebound and 14,900 will be crucial for an upside towards 15,100.

Considering the strong moves of the last two trading sessions in both directions, traders should sit on the fence without taking any directional bet, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.

“Lack of follow-through to the last Tuesday’s strong price action is vindicating the fact that market is still in a sideways consolidation zone. In fact, after today’s strong correction, close observation of the last nine trading sessions is pointing that the Nifty may be carving out a new consolidation zone inside the band of 14,900–14,300 levels,” Mohammad, said.

Hence in the next trading session, if the Nifty trades below 14,670, it will make an attempt to bridge the bullish gap, present in the 14,617–14,572 zone, registered on March 30, he said. “Usually such gaps act as support points on the downside and hence some buying should be expected if the index approaches the said gap zone,” Mohammad said.

If the index closes below 14,570, it can induce more weakness eventually dragging the index down to 14,300 levels, which, as of now, looks like the lower end of the consolidation zone, he said.

Upside strength shall be expected only if the index closes above 14,900 with initial targets of 15,100 levels.

On the options front, maximum Put open interest was seen at 14,000 followed by 14,500 strike, while maximum Call open interest was seen at 15,000 followed by 16,000 strike. Call writing was seen at 14,700 then 14,800 strike, while Put writing was seen at 13,800 then 13,500 strike.

The data indicates that the wider trading range for the Nifty could be 14,300-14,500 to 15,000-15,200.

India VIX remained flat at 20.64 levels.

The Bank Nifty opened negative at 33,764.80 and remained under pressure in the first half. Banking stocks did not hold well and the index ended the day with a loss of 571.20 points, or 1.69 percent, at 33,303.90.

The index has been underperforming the broader markets for the last few sessions and formed a bearish candle on the daily scale with a longer lower shadow.

“The Bank Nifty has to cross and hold above 33,500 levels to witness an up move towards 34,000 and 34,500, while on the downside, support is seen at 33,000 and 32,500,” Chandan Taparia, Vice President | Retail-Research at Motilal Oswal Financial Services said.

On the stock front, a bullish setup was seen in Ambuja Cements, TVS Motor, Jindal Steel & Power, Grasim Industries, UPL, Tata Steel, Balkrishna Industries, LIC Housing Finance, Ramco Cements, Cummins India, ACC, HUL and SBI. Weakness was seen in IDFC First Bank, HDFC, PVR, Coal India, ONGC, Kotak Mahindra Bank, Piramal Enterprises and Bajaj Finance, he added.