Technical View: Nifty, Bank Nifty form Inside Bar pattern; rangebound trade may continue

The Nifty50 fell from the word go and slipped 246 points to break below the vital 9,800-mark intraday before recovering 80 points from the day's low. Weak global cues and rising coronavirus cases in the country worried traders.

The index lost 1.6 percent and formed a bearish candle, which resembled an Inside Bar formation on daily charts as it moved within the trading territory of the previous session, indicating indecisiveness among market participants.

Experts expect the Nifty to consolidate within the trading range of June 12 in the coming sessions.

Traders should prefer neutral stance but intraday trade on short side can be considered below 9,726 levels for a modest target of close to 9,634 levels with intraday high as stop, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

The Nifty50 opened lower at 9,919.35 and extended sell-off to hit a day's low of 9,726.35, followed by some recovery. Finally, the index settled at 9,813.70, down 159.20 points or 1.60 percent.

"In line with our expectations, the market appears to have slipped into consolidation mode as it shaved off 160 points before signing off the session with an Inside Bar kind of formation. The possibility of consolidation inside last Friday's large intraday trading range of 9,996–9,544 can't be ruled out," Mohammad said.

If the index manages a sustainable trade above 9,996 levels, then it can test its 100-day simple moving average, the value of which is placed at around 10,180, he said.

"Similarly, if it slips below 9,726 levels in the next session, then intraday targets can be close to 9,544 levels. However, a breach of 9,544 on a closing basis shall resume the downswing and can eventually drag down the index towards 9,110 levels," Mohammad said.

On monthly options front, maximum Put open interest was at 9,000 followed by 9,500 strike, while maximum Call open interest was at 10,500 followed by 10,000 strike. Call writing was seen in 10,500 followed by 10,200 strike while Put writing was seen in 9,000 followed by 9,400 strike.

"The options data suggests a wider trading range in between 9,500 to 10,300 levels," Arpit Beriwal of Motilal Oswal Financial Services said, adding further rise in volatility index may result in a roller-coaster move in the market.

India VIX moved up by 5.68 percent to 32.58 levels.

The Bank Nifty opened on a negative note and started correcting in the opening hour itself.

The banking index continued to make lower lows in the first half of the session and fell by more than 700 points. Due to some recovery in the later half, the index trimmed of some of its intraday losses to end the session a shade above the 19,900-mark.

The index fell 741.60 points or 3.59 percent to close at 19,912.90 and unperformed the benchmark index. It formed a negative candle on the daily chart, which also resembles Inside Bar pattern.

"Looking at current chart structure, if the Bank Nifty sustains above 20,200, then we may see a bounce towards 20,700 and then 21,200 zone. While 19,500 zone would act as strong support for the index," said Arpit Beriwal, Assistant Manager, Analyst-Technical, Motilal Oswal Financial Services.