Technical View | Nifty may test 16,800 next week if bears tighten grip


The Nifty50 extended gains in the intra-day deals and even moved closer to 17,400, but profit booking in the last hour of trade wiped out all gains despite a positive trend in global counterparts, signalling a bearish sentiment at Dalal Street for next week. As a result, it was a disappointing start to the May series on April 29.

The index closed far lower than opening levels and hence, formed a large bearish candle on the daily charts, though there was bullish candle formation on the weekly scale, overall remained in a consolidation range of about 600 points between 16,800 and 17,400 levels. The index shed 0.4 percent for the week.

All sectors contributed to the fall with the major losers being banks, auto, technology, and FMCG stocks.

The Nifty50 had a gap up opening at 17,329 and climbed up to 17,378 in the afternoon, but failed to hold on to those gains in the last hour of trade and corrected sharply to hit a day’s low of 17,053, but still managed to get support at psychological 17,000-mark, which experts feel if it breaks, then 16,800 can be a possible target on the downside next week. The index settled with 143 points loss at 17,102.5.

“Friday’s move not only erased the gains of the preceding trading session but also resulted in a large bearish candle hinting at the resumption of a downswing,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

Hence, in the next trading session, he said if the Nifty trades below 17,050 levels for at least 30 minutes then it may revisit the recent corrective swing low of 16,800 levels.

On the upsides, he said unless the index registers a close above 17,400 levels, a sustainable rally shall not be expected. Considering the volatile moves, it looks prudent to avoid index bets, the market analyst advised.

On the options front, since it is the beginning of new series, open interest inventory is scattered. Maximum Call open interest was seen at 18,000 strike followed by 17,500 strike while maximum Put open interest was seen at 16,500 strike followed by 16,000 strike.

Marginal Call writing was witnessed at 17,300 strike then 17,200 strike while Put writing was seen at 17,200 strike then 16,800 strike. Option data clearly indicated that the Nifty50 could see a wider trading range of 16,700 to 17,600 levels for coming sessions.

Volatility had cooled down to 18 levels during the day but again rose and supported bearish sentiment. India VIX was up by 0.19 percent to 19.42 levels.

The selling pressure was also seen in broader space as market breadth was largely in favour of bears. More than two shares declined for every share rising on the NSE. The Nifty Midcap 100 and Smallcap 100 indices have fallen 0.84 percent and 1.16 percent, respectively.

Bank Nifty opened positive at 36,474 and headed higher to 36,719 levels, but later slipped into the negative territory and erased all the gains. Weakness in private as well as PSU banks pulled the index down by 334 points at 36,088 levels.

The bank index formed a bearish candle on the daily scale but respected its previous day’s low levels, while there was a small-bodied bullish candle formation on the weekly frame with a long upper shadow. The index gained 0.1 percent during the week.

Now Bank Nifty has to hold above 36,000 to move towards 36,250 and 36,666 levels whereas supports are placed at 35,750 and 35,500 levels, said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

Positive setup was seen in Indian Hotels, MCX India, Deepak Nitrite, HDFC Life, Tata Consumer Products, Sun Pharma, Kotak Mahindra Bank, Bata India, United Breweries, Escorts, and HDFC Bank, Taparia said.

However, weakness was seen in Gujarat Gas, Indraprastha Gas, Mahanagar Gas, Can Fin Homes, Axis Bank, Coal India, HPCL, ICICI Lombard General Insurance, Zee Entertainment Enterprises, Wipro, ONGC, Voltas, Sun TV Network, IRCTC, Tech Mahindra and SAIL, Taparia added.

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