Technical View: Nifty forms bearish candle, range-bound trade expected to continue
In a volatile session, the Nifty wiped off all the day’s gains in the afternoon to fall sharply before narrowing the losses to half a percent at the close on July 27. All sectoral indices, barring metals and PSU banks, closed in the red.
The index formed a bearish candle on the daily charts as the closing was lower than the opening level. Experts expect the range-bound trade to continue unless the index decisively breaks on either side of the 15,600-15,900 level.
The index started off on a positive note at 15,860.50 and hit an intraday high of 15,881.55 but erased all gains in the afternoon to sink to the day’s low of 15,701 before signing off the session at 15,746.50, down 78 points.
“Albeit the Nifty50 witnessed a sharp correction for the day it might not have altered the structure of prevailing trend which is still sideways, between 15,900 – 15,600 levels, for the last 29 trading sessions. Hence, unless the index registers a close below 15,600, a major downswing in the near term can’t be witnessed,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The 50-day simple moving average of the Nifty is placed around 15,650. Therefore, the bulls still have a chance to come back from 15,650–15,600 levels, he said.
A failure to defend the support zone, however, will give the bears an upper hand who can drag the index to 15,300, Mohammad said. For the time, traders have no better option than confining themselves to the fence, he said.
India VIX moved up 6.29 percent from 12.45 to 13.23. Options data indicated that the Nifty could see a broader trading range of 15,600-15,900.
On the options front, maximum Put open interest was seen at 15,000 followed by 15,700 strike, while maximum Call open interest was seen at 15,800 followed by 15,900 strike. Call writing was seen at 15,800 then 15,700 strike, while Put Unwinding was seen at all the immediate strikes with minor Put writing at 15,550 then 15,700 strike.
The Bank Nifty opened positive at 35,029.30 but could not sustain at higher levels. Follow-up buying interest was missing and the banking index drifted lower to the day’s low of 34,713.55. It closed below its 50-DMA with losses of 152.30 points at 34,797.40.
The index formed a bearish candle but continued forming higher highs for the fourth session in a row. “The Bank Nifty has to hold above 34,750 to move up towards 35,250 and 35,500, while on the downside, support is seen at 34,500 and 34,350,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
The Nifty future closed negative with the loss of 0.55 percent at 15,733. On the stock front, a bullish setup was seen in Manappuram Finance, NALCO, Hindalco, Jubilant FoodWorks, Tata Steel, Godrej Consumer Products, SBI, ICICI Prudential Life, SBI Life and DLF. Weakness was seen in Dr Reddy’s Labs, Glenmark, Aurobindo Pharma, Lupin, Cipla, Axis Bank, Biocon, Zee Entertainment, BHEL, Grasim, SRF, GAIL and Cholamandalam Investment, Taparia said.