The Nifty erased all the gains of the session in the late trade to close lower on July 30, forming a shooting star pattern on the daily chart. Select banking & financials and metals stocks weighed on sentiment, while auto and pharma stocks rallied.
During the week, the index fell 0.6 percent and made a hammer pattern on the weekly scale. Listless trade is expected to continue in the coming sessions, experts said.
A shooting star pattern is formed when the index comes under selling pressure as traders start booking profits at higher levels. The pattern is usually formed in an uptrend and is treated as a reversal pattern but requires confirmation.
The hammer is a bullish reversal pattern formed after a decline. It consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies the stock bounced back after testing its support, where demand is located.
The Nifty50 opened higher at 15,800.60 and gradually extended gains to hit the day's high of 15,862.80 in the afternoon. The index, however, undid all the gains in late trade to hit an intraday low of 15,744.85 and closed 15.50 points lower at 15,763.
"… if we closely observe the price action of the last five weeks, it appears that the Nifty is stuck in an extremely narrow range out of which four are negative candles," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The hammer formation on weekly charts may not count for much. Moreover, monthly charts also registered two back-to-back indecisive candle formations with an extremely narrow trading range of around 450 points, hinting at a pause in momentum, he said.
It seems the index may be positioning itself for a make or break kind of a level, forcing traders to focus on lower time frame charts, where the trading range is prevalent between 15,900 and 15,600, he said.
For any sustainable action, the index needs to break out of this range and till then traders have no option but to remain neutral, Mohammad said.
India VIX fell 1.06 percent from 12.94 to 12.80 levels.
Since it is the beginning of the new series, the options data is scattered at various far strikes. Maximum Put open interest was seen at 15,000 followed by 15,500 strike. while maximum Call open interest was seen at 16,000 followed by 15,800 strike. Options data suggests the Nifty can see a broader trading range of 15,500 to 16,000.
The Bank Nifty opened flat to positive and after a slight dip in the initial tick, it moved towards 34,750. In the last hour of the session, the index witnessed some decline and closed with losses of 107.20 points at 34,584.30.
Banking stocks continued to move in a lacklustre way and underperformed the broader market. The Bank Nifty formed a bearish candle on the daily and weekly scales. It formed lower highs of the last three sessions. The index lost 1.3 percent during the week.
"The Bank Nifty has to hold above 34,500 levels to move up towards 35,000 and 35,250, while on the downside, support is seen at 34,350 and 34,000," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, a bullish setup was seen in SRF, Sun Pharma, Tech Mahindra, Ashok Leyland, Vedanta, Marico, PVR, Voltas, Dabur, Mindtree, Shree Cement, Tata Chemicals, HCL Technologies, PFC, Tata Power and Jubilant FoodWorks. Weakness was seen in Bajaj Finance, Hindalco, Cholamandalam Investment, Bharat Forge, IndusInd Bank, Axis Bank, IOC, TCS and BPCL, he added.