Technical View: Nifty extends losses to form bearish candle, 15,600 crucial for stability
The Nifty50 opened lower and remained under pressure throughout the session, extending losses for the third straight day on July 20. Banking & financials, metals, pharma and auto stocks pulled the market down.
The index formed a bearish candle on the daily charts as the closing was lower than the opening level. Experts say 15,600 is expected to be a crucial level for market stability.
Traders should remain neutral on the long side, whereas intraday shorting can be considered below 15,578 for a target of 15,490 by placing a stop above intraday high, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The Nifty50 opened down at 15,703.95 and continued to trade lower to hit the day’s low of 15,578.55. The index closed 120.30 points down at 15,632.10.
The bears appear to be strengthening their grip on the market as the Nifty50 broke from its tight consolidation range of 15,870–15,680 levels on the line chart (closing price chart). “Hence, today’s intraday recovery from the lows of 15,578, which depicted a Hammer formation, may not have enough significance for bulls,” Mohammad said.
The force with which the market has been falling in the last three sessions may have altered the medium-term trend, which will be confirmed if the Nifty closes below 15,450, he said.
If bulls manage to defend 15,600 in the next session, some sort of stability shall be expected for the next couple of days, Mohammad said.
The initial hurdle can be around 15,728 and if the bulls manage to push the index beyond it, a pullback move should extend into the zone of 15,836–15,882, he said. If the Nifty, however, closes below 15,600, it will initially drag down the index towards 15,450.
India VIX moved up by 4.14 percent from 12.68 to 13.20 levels. “Spike in volatility is seen due to profit booking decline in the market but overall lower VIX could again attract some buying interest on declines near to key support zones,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the options front, maximum Put open interest was seen at 15,000 followed by 15,500 strike, while maximum Call open interest was seen at 16,000 followed by 15,800 strike. Call writing was seen at 15,700 then 15,800 strike, while Put writing was seen at 15,600 then 15,200 strike.
The data indicated that the Nifty50 could see a broader trading range of 15,500 to 15,800.
The Bank Nifty opened gap down at 34,791.15 and sharply moved lower to breach its 50-DMA. Bears had a complete grip over the rate-sensitive index. It closed at 34,415.40, losing 663.80 points or 1.89 percent.
The index formed a bearish candle on the daily scale and formed lower highs for the third session in a row. “Till it holds below 35,000 levels, more weakness could be seen towards next support at 34,000-33,900 levels,” Taparia said.
On the stock front, a bullish setup was seen in ACC, Asian Paints, Ambuja Cements, Berger Paints, Pidilite Industries, UltraTech Cement, Havells, Mindtree, HUL, Grasim and PFC.
Weakness was seen in InterGlobe Aviation, Piramal Enterprises, IndusInd Bank, PVR, Hindalco, ICICI Prudential, Jindal Steel & Power, Tata Power, Cholamandalam Investment, TVS Motor, Federal Bank, RBL Bank, Canara Bank, M&M Financial, Zee Entertainment, Cipla, Indraprastha Gas, Exide Industries, Tata Motors and Hero MotoCorp, he said.
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