Technical View: Nifty forms bearish candle, weakness may continue amid sideways trade

Technical View: Nifty forms bearish candle, weakness may continue amid sideways trade
August 06
18:28 2021

On a volatile day of trade, the Nifty went past 16,300 for the first time on August 6 but only to slip in the red as the RBI shared its monetary policy outcome that was in line with expectations and offering little to the market, said analysts.

The selling in banking & financials and index heavyweight Reliance Industries pulled the market lower.

The index formed a bearish candle on the daily charts as the closing was lower than the opening tick after the Doji pattern in the previous session. On the weekly scale, the index, which gained 3 percent during the week, formed a bullish candle.

Traders should remain neutral on the long side, whereas intraday traders can consider shorting below 16,210 for a modest target of 16,140 by placing a stop above intraday high, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

The Nifty opened higher 16,304.40 and hit an intraday record high of 16,336.75 but soon slipped to 16,223.30. It closed 56.40 points down at 16,238.20.

“A bearish candle, a follow-through to the indecisive Doji of Thursday may be hinting at temporary pause to the ongoing upward momentum. Moreover, our twin momentum oscillators generated a sell signal after today’s price action. Hence, we expect either a sideways move or weakness to continue into the next week as well,” Mohammad said,

If the Nifty slips below 16,210, weakness will continue and a slide to 16,140 can accentuate the selling pressure with the target in the 16,000-15,900 zone, he said.

If the index defends 16,210, then bulls can attempt a bounce towards 16,350 but strength can’t be assumed unless a close above 16,350 is registered. “In that scenario higher targets of 16,700 can be expected,” Mohammad said.

India VIX fell 2.04 percent from 12.87 to 12.60 levels. The stability in volatility indicates that the bulls are holding the market to cheer the fresh momentum, 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 16,000 strike, while maximum Call open interest was seen at 16,500 followed by 16,000 strike. Minor Call writing was seen at 16,700 then 16,550 strike, while Put writing was seen at 16,000 then 16,300 strike.

The data indicates that the Nifty can continue seeing a broader trading range of 16,000-16,500 in the coming sessions.

The Bank Nifty opened positive at 35,875.80 but moved in a decelerated manner throughout the day. Selective banking stocks were on the move, but overall, the index lacked strength.

Despite crossing 36,000, it could not sustain at higher zones and closed 25.50 points lower at 35,809.30.

It formed a bearish candle or an Inside Bar on the daily scale and a bullish candle on the weekly frame. “The Bank Nifty has to hold above 35,800 levels to witness an upmove towards 36,250 then 36,500 levels, while on the downside, support is seen at 35,500 then 35,250 levels,” Taparia said.

On the stock front, a bullish setup was seen in Adani Enterprises, Tata Chemicals, Adani Ports, Piramal Enterprises, Tata Consumer Products, Tech Mahindra, Bharti Airtel, PFC, Bata India, Siemens, TCS, Kotak Mahindra Bank and Lupin. Weakness was seen in Cipla, RBL Bank, Zee Entertainment, Berger Paints, Ramco Cement, Sun TV Network and LIC Housing Finance, he said.

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