Technical View | Nifty forms bearish candle, 16,400 remains critical support

India VIX was up by 1.79 percent at 20.85 levels.

India VIX was up by 1.79 percent at 20.85 levels.

The Nifty50 closed yet another session in negative terrain on June 1 and formed a bearish candle on the daily charts, though there was a smart recovery from the day’s low of 16,439. Hence, experts feel 16,400 is expected to be critical support for the index, while the 16,700 is going to be a key hurdle on the upside.

Overall, it was a volatile day for the market, as it is looking for strong cues to get direction on either side. Global markets remained mixed amid inflation concerns and contraction in China’s factory activity. Oil price at $ 117 a barrel, which is a major concern, also capped the upside in the market.

India VIX was up by 1.79 percent at 20.85 levels. Volatility was slightly up and negated its lower highs of the last five sessions which is giving discomfort to the bulls. Now, it needs to fall below the 18 mark for market stability, said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

The Nifty50 opened flat at 16,594 and climbed higher up to 16,649, but lost all gains in the afternoon and fell up to 16,439, an intraday low before showing a smart recovery in late trade. The index finally settled at 16,523, down 62 points.

“Nifty50 witnessed a buying interest as it entered into the bearish gap zone of 16,506 and 16,370 before recovering smartly from the intraday low of 16,438 levels. Hence, by taking into account the late hour recovery, the Nifty can be expected to trade positive in the next session. In that scenario, the index can initially head to test its 200 days EMA (exponential moving average) which is placed around 16,740 levels,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

However, for a sustainable up move, the Nifty should register a close above the said long-term average. In that case, the higher target should be around 17,100 levels, the market expert said.

On the downsides, 16,400 shall remain critical support and bears shall not gain upper hand unless they push the index below 16,400 levels on a closing basis, the expert added.

As per option data, the upper band of the trading range has shifted lower. Now, the data indicated that the Nifty50 could see a trading range of 16,200-16,800 levels in the coming sessions.

On the option front, maximum Call open interest was seen at 17,000 strike followed by 17,500 strike while maximum Put open interest was seen at 16,000 strike. Call writing was witnessed at 16,600 strike then 16,700 strike while Put writing was seen at 16,500 strike then 16,400 strike.

The broader space fared better than frontline indices as the Nifty Midcap 100 index was up 0.04 percent and Smallcap 100 index gained 0.28 percent with positive breadth. About 1,022 shares advanced for 909 declining shares on the NSE.

Bank Nifty opened negative at 35,359 and after slipping down up to 35,285, it witnessed a stellar recovery in the last hour of the session. It closed above its 50 EMA on the daily frame and closed with gains of 133 points at 35,621.

The index formed a bullish candle on the daily scale with a smart recovery of the entire day’s fall. “Now, it has to hold above 35,500 levels to see an up move towards 36,000 and 36,100 levels while on the downside, the support is seen at 35,250 and 35,000 levels,” Chandan Taparia said.

On the stocks’ front, the market expert said the positive setup was seen in Bharat Electronics, ICICI Prudential Life Insurance, Hindustan Aeronautics, City Union Bank, Voltas, Bandhan Bank, Canara Bank, Ashok Leyland, Coal India, Coromandel International, HDFC Life, M&M, M&M Financial, Jubilant Foodworks and HDFC.

However, weakness was seen in Bajaj Auto, Hindalco, Nestle, Britannia, Bajaj Finserv, Ipca Labs, Sun Pharma, and Escorts, he added.

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