Technical View | Nifty forms bearish candle, experts say 16,400 is the level to watch


The Nifty opened sharply higher to move towards 16,800 following a rally in Asian counterparts but squandered the gains in the last hour to close 44 points down at 16,584.

The index formed a bearish candle on the daily charts. If the selling pressure sustains, it can slip below 16,400, which could reverse the trend for the market, experts said. For the week, it gained 1.4 percent and formed a bullish candle as the closing was higher than the opening level.

The selling pressure was more intense the broader space. The Nifty midcap 100 and smallcap 100 indices fell 1.6 percent and 0.9 percent.

“The Nifty50 witnessed selling pressure as it tested its 200 days exponential moving average (EMA) with an intraday high of 16,793 levels. This sell-off with a bearish candle can be an early indication of short term reversal,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

It was critical that the bulls defend the low of 16,578 levels in the next session to retain their chances of a comeback or weakness may extend to 16,400. The trend will reverse in favour of bears if the Nifty closes below 16,370, the market expert said.

For the time, traders should remain neutral as the market may wait for further cues from the upcoming RBI monetary policy meeting, he said.

On the options front, maximum Call open interest was seen at 17,500 strike followed by 17,000 strike, while maximum Put open interest was witnessed at 16,000 strike. Call writing was seen at 16,800 strike followed by 16,900 strike, while minor Put unwinding was seen at immediate strikes.

The options data indicates that the Nifty may remain in the 16,400-16,800 range in the coming days.

Volatility has come down but is still hovering near the 20 mark, pointing to a rough ride for the market, experts said. India VIX, the fear index, was down by 1.69 percent to 19.98 levels. For the market to stabilise, it should remain below 18, say experts.

Banking index

The Bank Nifty opened 300 points higher at 35,930 but failed to get back above 36,000 and drifted sharply lower day’s low of 35,175.

It underperformed Nifty to close 339 points down at 35,275 and lost a percent during the week. It formed a Bearish Engulfing candle on daily charts and a Bearish candle on the weekly scale.

“Now it has to hold above 35,250 levels for an up move towards 35,750 and 36,000 levels, while on the downside, support is seen at 35,000 mark followed by 34,750 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

On the F&O stocks front, positive setup was seen in Reliance Industries, Trent, TCS, M&M Financial Services, Petronet LNG and HUL, he said.

However, weakness was seen in Ramco Cements, Grasim, UltraTech Cement, Bharat Forge, Jindal Steel & Power, Indian Energy Exchange, RBL Bank, ACC, BHEL, AU Small Finance Bank, Maruti Suzuki, Hero MotoCorp, Cipla, Ipca Labs, Axis Bank, GAIL India and Colgate Palmolive, he added.

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