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Nifty has been consolidating in a narrow range of 11,050-11,240 for the last five trading sessions and it has been finding strong resistance at 11,240 levels.

Bank Nifty has witnessed a correction of more than 1,400 points in the last four trading sessions.

The breadth of the market has been weakening with negative advance-decline ratio even on the days when Nifty closes in the green.

From the bottom of 7,511 registered in March 2020, Nifty has seen a rally of 48 percent.

Nifty IT index has risen more than 20 percent in the month till date and large-cap IT stocks like Infosys, Wipro and HCL Tech have been also major contributors in the current month's performance of Nifty.

The benchmark index has reached very close to the resistance of 76.4 percent Fibonacci retracement of the entire downswing seen from January 2020 top to March 2020 bottom.

Upward sloping trendline, adjoining the weekly bottoms of 26th Oct 2018, 23rd Aug 2019 and 20th September 2019, project the strong resistance zone at 11,300-11,350.

RSI on the Nifty daily chart, too, has reached the overbought zone and daily ADX indicator has crossed +DI line on the upside, giving profit booking signals for the short term.

However, any trend reversal has to be confirmed with the price breakdown, which is not yet the case with Nifty.

Support for the index is seen at 11,000, derived from the upward sloping trendline, adjoining the higher bottoms on the daily chart post-March 2020.

Nifty is still trading above 20, 50, 100 and 200-day moving average and is very close to the highest level of 11,240, registered in the recent upward rally.

So, it is too early to consider it as a trend reversal signal on the Nifty charts. However, we should not rule out the weakness in broader markets.

Oscillators on Nifty Midcap and Smallcap indices have been registering negative divergence, which gives the advance signal of market weakening.

So there are high chances of Nifty giving bearish trend reversal sign any time soon on the charts.

Considering the technical evidence discussed above, it would be advisable to cut trading long positions in the market.

Immediate support for Nifty is seen at 11,000, below which it is expected to find momentum selling towards 10,550-10,600 levels.

A close above 11,400 would confirm the resumption of an uptrend and shorts should be squared off in that case.

Hero MotoCorp | Sell | LTP: Rs 2,740 | Target price: Rs 2,520 | Stop loss: Rs 2,875 | Downside: 8%

The stock formed a bearish shooting star candlestick pattern on the weekly chart on the week ended 24th July.

The bearish candle is formed exactly at the downward sloping trendline, adjoining the lower tops on the weekly chart. RSI oscillator has formed negative divergence on the daily chart.

L&T Finance Holdings | Sell | LTP: Rs 59.10 | Target price: Rs 54 | Stop loss: Rs 62.50 | Downside: 9%

The stock has formed bearish head and shoulder pattern on the daily chart. It has been forming lower tops and lower bottoms on the daily chart.

It fell more than 3 percent with a jump in volumes on 27th July 2020. Indicators and oscillators have been showing weakness on the chart.

Punjab National Bank (PNB) | Sell | LTP: Rs 32.30 | Target price: Rs 29 | Stop loss: Rs 34 | Downside: 10%

The stock has formed a bearish head and shoulder pattern on the daily chart. It has breached the crucial support of 50-day moving average, placed at Rs 33.

PSU banking space has remained underperformer in the rising markets and same is likely to continue.

The primary trend of the stock has been bearish with lower tops and lower bottoms on daily and weekly charts.

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