The Nifty50 got off to a strong start on the July series expiry day but the bears ate up the gains in the lunch session amid weak global cues and selling in banking & financials.
The index ended 100 points lower on July 30, continuing the downtrend for a second consecutive session and again formed a bearish candle on daily charts.
Experts feel the selling pressure can be extended in the coming session if the index breaks the day’ low of 11,084.
Traders should adopt a wait-and-watch approach in the next session without attempting a trade, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.
However, positional shorting opportunity can be considered if the Nifty trades below 11,000 in the last 15 minutes of the next session, he said.
After opening higher, the Nifty50 hit an intraday high of 11,299.95 in the morning but wiped out all gains in afternoon to touch the day's low of 11,084.95 before signing off the session with a loss of 100.70 points at 11,102.20.
"Weakness may be slowly creeping in the Nifty50 as it closed below the ascending trendline, which is in progress from last March lows of 7,511 and has offered support to prop up the prices higher on multiple occasions in recent past. However, last 26 sessions of price behaviour chalked out an ascending channel with multiple touch points whose support is placed around 11,000 levels," Mohammad said.
If the Nifty slips below 11,084 in the next session, then initially the corrective swing shall get extended to 11,000 and if it breaches this channel support, then it shall accelerate downwards towards its 200-day moving average whose value is placed at around 10,861, he said.
If expiry was the reason for the fall in the index and doesn’t witness a follow through selling in the next session, then the Nifty shall remain sideways with upsides being capped in the 11,300 –11,350 zone, said Mohammad.
Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said mechanical indicators like RSI had also given a negative crossover from its overbought scenario on the daily scale, which didn’t bode well for the bulls.
"Failure breakout above 11,300 and sustained selling pressure at higher zones indicates that short-term profit-booking cannot be ruled out," he said.
The Bank Nifty also mirrored the Nifty50. It opened strong and rallied up to 22,252.60 in the morning session but erased all gains in the afternoon to hit an intraday low of 21,580.15.
The index fell 429.80 points or 1.95 percent to close at 21,646.80 and formed a bearish candle on the daily charts.
The index came back to 50-DEMA after a bounce of last two trading sessions which indicates underperformance and weak structure, said Taparia.
The index is showing sign of tiredness and bounces are being sold with emergence of negative price set up on weekly scale, he said.
If the Bank Nifty holds below 22,000, then weakness could be seen towards 21,000 and even lower levels, while on the upside immediate hurdles are shifting to 22,250-22,350 levels.
Taparia said positive setup was seen in Apollo Hospitals, Divis Labs, Dr Reddy's Labs, NIIT Technologies, Sun Pharma, Wipro, ACC, Mindtree and Infosys, while weak structure was seen in Manappuram Finance, BPCL, Indiabulls Housing Finance, RBL Bank, Equitas Holdings, HDFC, PNB and Axis Bank.