Nifty50 snapped its four-day winning streak and closed below 14,900 levels on May 11 amid selling pressure in financials and IT stocks.
But the index formed a bullish candle on the daily charts as the closing was higher than opening levels. Experts feel the index is unlikely to gain strong momentum unless it decisively closes above 15,045 levels.
The volatility has fallen below the 20 mark for the first time since April 9. India VIX fell by 1.98 percent from 20.22 to 19.83 levels, which experts feel needs to hold below 20 to again attract a bullish stance.
Nifty50 opened lower at 14,789.70 and remained under pressure throughout the session. It touched an intraday high of 14,900 and a low of 14,771.40, before closing 91.60 points down at 14,850.80.
"Nifty50 appears to have resumed its downswing as it sharply reacted from the higher end of its trading range present around 15,000 levels. This sharp downtick with a gap down opening has erased laborious gains of preceding two trading sessions," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
However, bulls should take comfort in the fact that the index did not widen its losses post gap down opening. Hence, sustaining above 14,771 should be critical in the next trading session as a breach of this can initially drag down the index towards its 100-day simple moving average, placed around 14,550 levels, that have acted as strong support on a closing basis.
"Though the 50-day simple moving average is placed around 14,740 levels, it has no technical significance as it failed to act either as a support or resistance level in this consolidation phase of last the 3 months," he added.
According to him, if Nifty sustains above 14,771 levels then a sideways move between 14,800–15,000 levels can be expected. Strength in Nifty shall emerge only on a close above 15,045 levels.
Therefore Mazhar Mohammad advised traders to avoid buying the dip and rather short Nifty below 14,770 levels for a target of 14,550 by placing a stop above 14,900 on the closing basis.
On the 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 15,100 and 15,300 strike while Put writing was seen at 14,500 then 14,400 strike.
Options data indicate the immediate trading range for the Nifty could be 14,700 to 15,000 levels.
Bank Nifty opened gap down at 32,640.95 but managed to hold 32,500 levels and bounced to 33,150 levels. It has faced sustained pressure near 33,333 since the last three sessions. It closed the day with losses of 270.20 points at 32,872.20 but despite the consolidation, it outperformed the broader market today.
The index formed a bullish candle as the closing was higher than opening levels. "But the index negated its higher highs - higher lows formation of the last three sessions. Now it has to hold above 32,750 to witness an up move towards 33,333 while on the downside support is seen at 32,500 and 32,250 levels," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stocks' front, bullish setup was seen in BHEL, Coal India, Container Corporation, GAIL, NTPC, IOC, Voltas, HPCL, Siemens, ONGC, Bharat Electronics, ICICI Prudential, Havells, Berger Paints, IGL, BPCL, TVS Motor, UPL, Power Grid and Sun Pharma while weakness was seen in HDFC, Kotak Mahindra Bank, Ramco Cement, Cipla and HCL Technologies, he added.