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Technical View: Nifty forms bearish candle on weekly charts, 11,000 crucial support level

Mazhar Mohammad of feels it looks prudent to remain neutral on long side where as shorting can be considered on a close below 11,000 levels.

July 31, 2020 / 06:54 PM IST

The Nifty 50 opened lower and remained volatile with a negative bias for a major part of the session on July 31 on profit booking in Reliance Industries and HDFC Group stocks.

The index continued profit booking for the third consecutive session after hitting 11,300-mark, forming a bearish candle on the daily charts.

On the weekly scale too, the index registered bearish candle formation as it snapped a six-week winning streak with a loss of 120 points for the week.

The index has also broken its previous day's intraday low in closing today. Experts expect consolidation to continue in coming session if the index holds crucial 11,000-mark, but if it breaks the same then selling pressure can extend further.

For time being, Mazhar Mohammad of feels it looks prudent to remain neutral on the long side whereas shorting can be considered on a close below 11,000 levels.

India VIX fell by 2.17 percent to 24.19 levels. "Any spike in volatility could cause some decline but overall lower VIX is ruling out major fall in the market for time being," Chandan Taparia of Motilal Oswal said.

After opening lower today, the Nifty 50 remained volatile and hit an intraday high of 11,150.40 in early trade and a low of 11,026.65 in the afternoon. The index closed 28.70 points lower at 11,073.50.

"Nifty50 continued its volatile move as it remained choppy inside a narrow range of 124 points before signing off the session with a bearish candle on both the daily as well as weekly charts. At this juncture market appears to be clueless as technical oscillators both on daily as well as weekly charts offering mixed signals," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

He said daily MACD (Moving Average Convergence and Divergence) was in sell mode whereas weekly MACD generated a buy signal while other momentum oscillators on weekly charts are in sell mode.

Hence, traders need to depend more on price chart which appears to be moving inside a narrow 27-day ascending channel and right now trading around a lower boundary of the said channel, he feels.

According to Mazhar Mohammad, in next trading session if Nifty sustains above 11,000 levels then it can remain sideways with positive bias with limited upsides in the zone of 11,300 – 11,350 levels but if it closes below 11,000 then it shall ideally trigger a fresh bout of selling pressure with initial targets of 10,860 levels.

Options data suggested that the Nifty could trade in a wider range of 10,800 to 11,400 levels in coming sessions.

Maximum Put open interest was seen at 11,000 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Marginal Call writing was seen in 11,500 and 11,100 strike while Put writing was seen at 10,500 then 10,200 strike.

Bank Nifty failed to surpass 21,800 zone and drifted towards 21,375 levels but support based buying from lower levels has helped it to regain its losses to close on a flattish note. The index settled at 21,640, down 6.85 points.

It has been making lower top – lower bottom on daily while forming a Bearish Belt Hold candle on a weekly scale, while there was Hammer kind of formation on the daily charts.

"Bank Nifty closed the last trading session near its 50 DEMA which is a crucial level for the next movement over the coming week. Banking index is showing signs of tiredness and bounces are being sold with the emergence of the negative price set up on a weekly scale," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

"Now till it holds below 22,000 zones, weakness could be seen towards 21,000 and even lower levels while on the upside immediate hurdles are shifting at 22,250-22,350 levels," he added.

Positive setup was seen in Aurobindo Pharma, Cadila Healthcare, Cipla, Sun Pharma, Balkrishna Industries, Dabur, UPL, JSW Steel, Divis Labs, HCL Technologies, M&M and Tech Mahindra while the weak structure was seen in HPCL, BHEL, ZEE Entertainment and LIC Housing Finance said Chandan Taparia.

Disclaimer: "Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol."

Sunil Shankar Matkar
first published: Jul 31, 2020 06:54 pm