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Technical View | Nifty forms bearish candle ahead of RBI interest rate decision

The street may maintain caution till the meeting outcome and if the index gets back firmly above 17,450, then there is a fair chance of the index moving towards 17,800 levels, with crucial support at the 17,000 mark, experts said.

August 04, 2022 / 05:13 PM IST

The Nifty50 had yet another high volatile session on August 4 ahead of the big event - the interest rate decision by the RBI Monetary Policy Committee due tomorrow. Hence, the street may maintain caution till this outcome and if the index gets back firmly above 17,450, then there is a fair chance of the index moving towards 17,800 levels, with crucial support at the 17,000 mark, experts said.

The 50-share index snapped a six-day winning streak and formed a bearish candle on the daily charts as the closing was lower than opening levels. It has made an attempt, during the day, to fill the previous bullish gap zone created on August 1, but failed as bulls managed to push the bears back to some extent.

The Nifty50 opened strong at 17,463 and climbed up to 17,491 levels, but wiped out all gains in late morning deals to hit a day's low of 17,161. The index managed to recoup most of the losses in the later part of the session and finally settled with 6 point-loss at 17,382.

Also read - Taking Stock: Market ends lower after 6 days of gains; all eyes on RBI policy tomorrow

"Nifty50 witnessed a wild swing in a large trading range of 329 points which depicted a High Wave candle formation. This only hints at more uncertainty going forward," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

Close

While the weakness in this four-day-old short consolidation phase can be gauged through indecisive formations as well as sell signals on certain momentum oscillators of lower time frame charts, much of the next session's move will be guided by the monetary policy statement from the RBI.

Hence, post policy outcome it becomes necessary for the market to sustain above 17,000 levels as a breach of that level on a closing basis can trigger a short-term downswing, the market expert said. However, the upswing can be expected to expand further to a close above 17,450 with a target placed around 17,800 levels.

Also read - Gainers & Losers: 10 stocks that moved the most on August 4

For the time being, considering indecisive formations accompanied by the volatile move of the day, it looks prudent on the part of traders to remain neutral on the markets, he advised.

The volatility index India VIX spiked above 19 levels ahead of the RBI event, closing higher by 4.37 percent to 19.26 levels. If the volatility climbs above the 20 mark, then there could be some selling pressure in the market, experts said.

On the Option front, we have seen maximum Call open interest at 18,000 strike followed by 17,500 strike while maximum Put open interest was seen at 16,500 strike followed by 17,000 strike. Marginal Call writing was seen at 17,400 strike then 17,700 strike, while we have seen Put writing at 17,400 strike, then 17,000 strike.

With the volatility and small correction, the Option data indicated that the Nifty could see a trading range of 17,100 to 17,550 levels in the near term.

Bank Nifty opened positive at 38,111, but could not surpass 38,250 levels and cascaded down to 37,250 levels. Buying was seen at crucial support zones and the index managed to minimise losses before ending 234 points down at 37,756.

The banking index has formed a bearish candle on the daily scale. Now, it has to hold above 37,777 levels to make an up move towards 38,250 and 38,500 levels whereas supports are placed at 37,500 and 37,250 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Aug 4, 2022 05:08 pm
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