Technical View: Nifty forms bearish candle, experts say focus on stock-specific opportunities
The Nifty50 remained volatile throughout the session and ended a tad lower on July 26. Select banking and financials, auto and FMCG stocks pulled the market lower, while buying in IT, metals and pharma stocks limited the downside.
The index formed a bearish candle on the daily chart as the closing was lower than the opening tick. Experts said range-bound trade could continue till the index breaks 15,900 on the upside or 15,600 on the downside.
For the time, traders should shift their focus towards stock-specific opportunities to trade in either direction, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
After opening flat at 15,849.30, the Nifty traded in a narrow range of about 90 points. The index hit an intraday high of 15,893.35 and low of 15,797 before closing 31.50 points lower at 15,824.50.
“Nifty50 continued its lackadaisical way of trading as it remained in a range of 96 points before signing off the session with an indecisive formation. Hence, going forward strength in the index shall not be expected unless it registers a strong close above 15,900 levels,” Mohammad said.
In the next trading session, weakness can be expected if the index slips below 15,768. “As the bulls are repeatedly faltering from the 15,900 levels, it still appears to be a rangebound market between 15,900–15,600 levels,” he said.
For a directional move to emerge, the index needs a breakout in either of the directions, he said.
But as the advance-decline ratio favours the bears along with deteriorating oscillator/indicator setup on longer time periods, the bears may eventually gain upper hand unless the bulls claim their stake back with a strong close above 15,900, he said.
India VIX moved up by 5.87 percent from 11.76 to 12.45 levels. “Spike in volatility has given some profit booking but overall, lower volatility indicates that buying interest could emerge again at any meaningful declines,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the options front, maximum Put open interest was seen at 15,800 followed by 15,000 strike, while maximum Call open interest was seen at 16,000 followed by 15,900 strike. Call writing was seen at 15,900 then 15,800 strike, while Put writing was seen at 15,800 then 15,700 strike. Options data indicated that the Nifty could see a broader trading range of 15,700 to 16,000 levels.
The Bank Nifty opened negative at 34,947.85 and remained rangebound for the most part of the session. It surpassed 35,100 but could not sustain at higher zones. It moved in a zig-zag fashion and closed 84.70 points lower at 34,949.70. It formed a Doji candle with long shadows on daily scale and has been forming higher tops from three sessions.
“The Bank Nifty has to cross and hold above 35,000 levels to move up towards 35,250 and 35,500, while on the downside, support is seen at 34,750 and 34,500 levels,” said Taparia.
A bullish setup was seen in Apollo Hospitals, Max Financial Services, SAIL, Ramco Cements, Bajaj Finserv, Divis Labs, Hindalco, UltraTech Cement, Tata Steel, Havells, Ambuja Cements, Titan, ACC, Sun Pharma and Infosys. Weakness was seen in M&M Financial, Glenmark, Mcdowell, RBL Bank, LIC Housing Finance, BHEL, Ashok Leyland, Motherson Sumi Systems, PNB, Apollo Tyres, Cholamandalam Investment, Tata Motors, Maruti and Escorts, he said.