The Nifty50 remained under pressure for major part of the session on May 20 and closed lower for the second consecutive day to form a bearish candle on the daily charts as the closing was lower than opening levels.
Banking & financials, metals, FMCG, and select IT stocks witnessed selling pressure. But the broader markets outpaced frontliners with the Nifty Midcap 100 and Smallcap 100 indices ending moderately lower.
Mazhar Mohammad of Chartviewindia feels as of now there are no signs of strength and traders should refrain from creating long side bets on index. He advised short-term traders to short the index below 14,884 and look for a target close to 14,740 levels with a stop above intraday high.
The Nifty50 opened higher at 15,042.60 and immediately hit an intraday high of 15,069.80, but failed to hold on to those gains for a long and traded lower after initial hour of volatility. The index hit a day's low of 14,884.90, before signing off the session at 14,906, down 124.20 points.
"Nifty50 appears to have whipsawed its recent breakout registered on May 18 as the index gave up all the gains with a close below the bullish gap present in the zone of 15,043 to 14,938 which ideally supposed to act as a support level but failed to do so," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
The expert further said that if the index trades below 14,884 levels in the next trading session, it should eventually head to its initial targets placed around 14,600 levels.
However, if today's fall is just related to weekly expiry then bulls should not only defend 14,884 in next session but will also make an attempt to rally towards recent high of 15,137 levels, according to Mazhar.
India VIX moved up further by 1.72 percent from 19.31 to 19.65 levels, but continued to trade below 20 levels.
On options front, maximum Put open interest was seen at 14,000 followed by 14,500 strike while maximum Call open interest was seen at 15,000 followed by 15,500 strike. Call writing was seen at 15,000 and 15,500 strike while Put writing was seen at 14,900 then 15,000 strike. Option data suggests a broader trading range for the Nifty at 14,700 to 15,200 levels.
Bank Nifty opened flattish at 33,692.55 but failed to hold above 33,750 and has fallen towards 33,300 levels. The second half of session saw more weakness but it closed above its 50-DMA and settled with losses of 350.60 points or 1.04 percent at 33,334.60.
The index formed a Bearish candle on daily scale and has been forming lower highs – lower lows from the last two sessions. "Now it has to hold above 33,333 to witness an upmove towards 33,750 and 34,000 levels while on the downside support is seen at 33,000 and 32,750 levels," said Chandan Taparia, Vice President and Analyst-Derivatives at Motilal Oswal Financial Services.
On stocks' front, bullish setup was seen in Indiabulls Housing Finance, Bosch, Cholamandalam Investment, RBL Bank, M&M, Cipla, Ramco Cement, BPCL, MRF, Bharat Electronics, ACC, Cummins India, Ashok Leyland, Colgate Palmolive and PFC while weakness was seen in SAIL, Jindal Steel & Power, Tata Steel, Gail, ONGC, Petronet LNG, Britannia Industries, Indraprastha Gas, Bharti Airtel and Kotak Mahindra Bank, Taparia added.