The Nifty remained volatile throughout the session and closed in the red, extending the downtrend to the second day on February 4, as banking and auto stocks came under selling pressure.
Despite a choppy day, volatility remained below the 20 mark, down 1.37 percent to 18.89 levels, but it has to fall below the 15 mark for the market to stabilise.
The index formed a bearish candle on the daily charts, as the closing was lower than opening levels amid elevated oil prices and mixed global cues.
On the weekly basis, the index gained 2.4 percent and formed a bullish candle that resembled a Shooting Star pattern.
A Shooting Star pattern is formed when the index comes under selling pressure as traders start booking profits at higher levels. The pattern is usually formed in an uptrend and is treated as a reversal pattern but requires confirmation.
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The index started off lower at 17,590.20 and remained in the 17,618-17,462 range before closing with 44 points loss at 17,516.30.
“The Nifty50 registered a Shooting Star kind of formation on weekly charts with a long upper shadow hinting that pull-back attempt from the lows of 16,836 to a recent high of 17,794 levels is weakening. Moreover, despite the recent upsurge, most of the momentum indicators remained in the sell mode,” said Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.
If the Nifty doesn’t stabilise above 17,462 in the next couple of sessions, it can slip to 17,244 levels. If it closes below 17,244, it will confirm the end of the pullback rally.
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Contrary to this, if the index sustains above 17,462, it can lead to sideways consolidation, Mohammad said.
For the time, Mohammad said it would be prudent to remain neutral on the long side, while intraday traders can short below 17,460 and look for a modest target of 17,350.
The options data indicates that the Nifty could remain in a broader range of 17,200-18,000 in the coming days.
Maximum Call open interest was seen at 18,000 and 17,500 strikes, while maximum Put open interest was seen at 16,500 and 16,000 strikes. Marginal Call writing was seen at 17,500 and 17,600 strikes, while Put writing was seen at 17,500 and 17,000 strikes.
The broader markets also extended selling pressure. The Nifty midcap 100 and smallcap 100 corrected 0.76 percent and 0.92 percent, respectively.
Bank Nifty
The Bank Nifty opened positive at 39,128 and climbed to 39,278.60 in the morning but squandered the gains following a selloff in banking names.
The index finally closed at 38,789.30, down 220.70 points, and formed a bearish candle on the daily scale.
However, there was a bullish candle formation on the weekly frame, as it gained 2.9 percent during the week.
“Now if it sustains below 38,850, weakness could be seen towards 38,500 and 38,250, whereas, hurdles exist at 39,250 and 39,500 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, he said a bullish setup was seen in Cholamandalam Investment, Vedanta, Marico, Hindalco, Dabur, Jindal Steel & Power, ONGC, Sun Pharma, Asian Paint, Tata Power and HDFC Bank.
Weakness was seen in M&M Financial, Aditya Birla Fashion & Retail, Lupin, Zee Entertainment, MCX, Indiabulls Housing Finance, Max Financial Services, Bata India, RBL Bank, Shriram Transport, M&M, L&T Finance Holdings and Bharat Forge, Taparia said.
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