Technical View: Nifty forms bullish candle on weekly charts, may consolidate in 15,400-15,750 range
The Nifty50 consolidated for the most part of the session and closed slightly lower on June 4, as the RBI monetary policy committee left key rates unchanged. Banks and select FMCG stocks were under pressure, while auto and metals stocks supported the market.
The index opened higher at 15,712.50 and hit an intraday record high of 15,733.60 but 90 minutes into the morning trade, it erased all gains to turn volatile. The index closed 20.10 points lower at 15,670.30.
The index formed a bearish candle that resembled a Hanging Man pattern on the daily charts. On the weekly scale, it continued forming a bullish candle for the third consecutive week. The index gained 1.5 percent during the week.
As trend appears to be sideways in the 15,750–15,400 range, traders should remain neutral by focussing on stock-specific opportunities, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
Volatility increased a bit but still remained supportive of bulls. India VIX moved up by 1.27 percent from 15.74 to 15.94 levels.
A Hanging Man kind of indecisive formation hints that the market is stretched on the upside. Some of the momentum oscillators on weekly charts are in overbought zone, while indicators like Weekly RSI failed to maintain pace in line with price chart, indicating some negative divergence and lack of strength in upward momentum, Mohammad said.
If the bulls manage to get past 15,750, they would hardly be able to add 150–200 points as the next critical resistance seems to be placed around 15,850, he said.
It’s critical that the Nifty sustains above 15,600 in the next session to retain positive bias as a breach of the level can drag the index to 15,459 but a close below 15,374 is needed for the bears to gain an upper hand, he said.
On the options front, maximum Put open interest was seen at 15,000 followed by 14,500 strike, while maximum Call open interest was seen at 16,000 followed by 15,500 strike. Minor Call writing was seen at 16,000 then 15,700 strike, while Put writing was seen at 15,000 then 15,500 strike. The data indicated an immediate trading range of 15,500-15,850 for the Nifty.
The Bank Nifty opened slightly positive at 35,657.85 but underperformed the broader market. It mostly traded southwards during the day and finally closed the session with losses of 357.30 points at 35,291.70.
It formed a bearish candle on daily scale but continued its higher highs-higher lows formation of the last four weeks.
“It has to hold above 35,250 to witness an upmove towards 35,750 and 36,000, while on the downside, support is seen at 35,000 and 34,750 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, bullish setup was seen in Bharat Forge, Adani Enterprises, LIC Housing Finance, United Breweries, Piramal Enterprises, L&T Finance Holdings, Ashok Leyland, NMDC, HPCL, Tata Motors, Grasim, Tata Chemicals, Bajaj Finserv, McDowell, L&T and BHEL. Weakness was seen in Nestle India, RBL Bank, Canara Bank, Aurobindo Pharma, Sun TV Network and HUL, he added.