Technical View | Nifty forms Hammer pattern, pullback trade likely

The volatility index climbed above 24 levels, giving comfort to bears. Hence, it has to fall below the 20 mark to have a stable market, going forward. India VIX was up by 2.24 percent to close at 22.80 levels.

The Nifty50 opened with a 30-point gain at 16,270 and climbed above 16,300 levels, but the initial uptrend failed to sustain long and the index corrected up to 15,993 in the afternoon followed by a gradual recovery. It recovered more than 170 points and settled with a 73-point loss at 16,167.

"Despite remaining choppy throughout the trading session, this counter managed to recoil a substantial part of the intraday losses which resulted in a Hammer kind of formation. This kind of formation shall have bullish connotations provided it is followed by a positive close in the next trading session," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

Moreover, twin momentum oscillators, whose accuracy is higher around short-term turning points, are in buy mode. Hence, "we continue to look for a pullback trade, which if materialises, shall initially take the indices towards 16,650 levels," the market analyst said.

Contrary to this, the market expert said a close below 16,000 levels shall eventually lead to the retest of March lows present at around 15,670 levels.

For the time being, he advised traders to remain neutral and wait for some signs of strength before playing for a pullback trade.

After the consistent selling pressure in the market, the trading range for the Nifty50 as per option data has shifted further lower to 15,800-16,500 levels for coming sessions, from 16,000-16,500 levels earlier.

On the option front, maximum Call open interest was seen at 17,000 strike, while maximum Put open interest was witnessed at 16,000 strike. Marginal Call writing was seen at 16,500 strike followed by 16,300 strike while Put writing was seen at 16,000 strike and then 15,800 strike.

Also read - More than 260 stocks hit 52-week low, 450 stocks hit lower circuit today

Bank Nifty opened positive at 34,686.30 and was showing relative strength for the entire session. It crossed its previous day's high levels with strength in selective private banks and closed at 34,693 with gains of 210 points.

The banking index formed a long-legged Doji candle on the daily frame and has been forming higher highs since the last two sessions. "Now, it has to hold above 34,500 levels to make an up move towards 35,000 and 35,250 levels while support is placed at 34,250 followed by 34,000," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

He further said a positive setup was seen in Gujarat Gas, Siemens, Coromandel International, Tata Chemicals, Axis Bank, Godrej Consumer Projects, HDFC, Havells, PVR, and Kotak Mahindra Bank.

However, weakness was seen in Indiabulls Housing Finance, Can Fin Homes, RBL Bank, L&T Technology Services, Dixon Technologies, BHEL, Indian Energy Exchange, L&T, IRCTC, Piramal Enterprises, PFC, and BPCL.

The market breadth was in favour of bears as four-and-half shares declined for every share rising on the NSE. The Nifty Midcap 100 index fell 0.4 percent and Smallcap 100 index hit quite hard, down nearly 3 percent.

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.