Technical View: Nifty forms bearish candle, experts say traders can remain short


The Nifty50 extended losses to fourth consecutive session and closed at over a three-week low on July 1, dragged by select banking & financials, IT and metal stocks.

The index formed a bearish candle on the daily charts as the closing was lower than opening levels. Experts say the index can hit 15,500 if it fails to get back above 15,700.

Traders should remain short and look for a target of 15,550 with a stop above 15,700 on a closing basis, Mazhar Mohammad, Chief Strategist –Technical Research & Trading Advisory at told Moneycontrol.

The Nifty50 opened marginally higher at 15,755.05, which was also the intraday high. The index consolidated with a negative bias for the most part of the session. It slipped to the day’s low of 15,667.05 in late trade and closed 41.50 points lower at 15,680, the lowest closing since June 9.

“Bears appear to be slowly tightening their grip over the indices as the Nifty50 closed below its seven-day-old minor consolidation zone present between 15,900 and 15,700,” Mohammad said.

The inability of the bulls to push the index above 15,700 in the next session can drag down it to the consolidation breakdown target of 15,500, which coincides with the lower end of the larger consolidation band of 15,900 – 15,500, he said.

A breach of 15,500 on a closing basis can unleash a fresh leg of the downswing, setting the tone in the favour of the bears. In that scenario, a bigger correction towards 15,000 and 14,900 can’t be ruled out, he added.

If the index closes strongly above 15,700 in the next session, it may come back in the sideways territory with upsides remaining capped at 15,900, Mohammad said.

Volatility declined further to drop to an 18-month low. The India VIX, which measures expected volatility in the market, fell 1.57 percent to 12.84, the lowest level since January 3, 2020.

“Volatility is declining, which is a sign that bulls are resting and they could bring volatility to the market,” said Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities.

Traders need to be careful when adding long positions at high levels and such markets invite unpleasant events, he said.

After opening higher at 34,866, the Bank Nifty hit an intraday high of 34,917.65 and a low of 34,650.95 in the afternoon. The index settled 88.20 points lower at 34,684 and formed a bearish candle on the daily charts.