On another volatile day, the Nifty50 erased gains in late morning deals and closed flat with a negative bias on August 13, though the broader markets outperformed the benchmark index. The Nifty midcap index was up 1.57 percent and smallcap gained 0.75 percent.
The Nifty closed below its opening levels and hence formed a bearish candle that resembled the Doji indecisive formation.
A Doji candle indicates there is some indecisiveness among the bulls and the bears and bounce were being sold in the absence of follow-up buying interest.
Given the rangebound trade for around a week, the market could be waiting for firm directions on either side, hence traders should be cautious, experts say.
As the Nifty seems to be in a no-trade zone, traders should wait for a breakout in either direction, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The bulls seem to be in a strong position and major correction is unlikely, as volatility has been falling, experts say. India VIX fell by 1.31 percent at 20.56 levels.
The Nifty50 opened higher at 11,334.85 and hit an intraday high of 11,359.30 but wiped out the gains in late morning deals to hit the day's low of 11,269.95 in afternoon. The index settled at 11,300.50, down eight points.
The Nifty50 continued to be listless as the trading range remained 90 points. “Albeit technical picture on oscillator front continues to remain mixed, fresh sell signals on lower time frame charts are being witnessed," Mohammad said.
The weakness in the price chart and slowing momentum on the RSI chart, which was developing a negative divergence with a lower top, was favouring the bears, he said.
Contraction of the Bollinger Bands on the daily chart was also hinting a breakout in the Nifty, which should pave the way for swift move in either direction, he said.
"While weakness will be confirmed on a close below 11,242 levels, strength shall resume on a strong close, with wide intraday trading range above 11,322 levels. On such strength, a higher target towards 11,450 can be expected. A breakdown below 11,242 can set the tone for a swift downswing, with eventual target placed around 10,882 levels," he added.
Options data indicated that the lower end of the trading range shifted higher. The Nifty could witness an immediate trading range of 11,100-11,500 against 11,000-11,500 in the previous session.
Maximum Put open interest was seen at 11,000 followed by 10,500 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Minor Call writing was witnessed at 11,500 strike followed by 11,700 strike while Put writing was seen at 10,600 then 11,000 strike.
The Bank Nifty opened higher at 22,395.20 and hit a day's high of 22,439.95 but failed to hold above 22,400 zone and drifted lower to 22,139.60. It remained consolidated for most part of the session with selling pressure at bounce.
The index fell 67.70 points to close at 22,196.30 and formed a bearish candle similar to a Dark Cloud Cover on the daily scale.
"Mechanical indicators are still holding their bullish crossover but require follow-up buying to confirm the next momentum, else this bounce could take a pause for consolidative move," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.
The index will have to stay above 22,000 zone to move towards 22,500 then 22,750. On the downside, immediate support is seen at 21,750 then 21,500, he added.
Taparia said positive setup was seen in Ashok Leyland, BHEL, Tata Power, PVR, Tata Motors, L&T, Tata Consumer Products, Hindalco, BEL, Motherson Sumi, Titan, Godrej Consumer Products, TVS Motor, Voltas, Jubilant Foodworks, Hero Motocorp, and Balkrishna Industries while weak structure was seen in ACC, Biocon, Shree Cement and Kotak Mahindra Bank.
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