The Nifty50 retreated with more than a percent loss for first time in last seven consecutive sessions and closed off record highs on July 21, led by a steep fall in technology stocks, mainly Infosys after its quarterly earnings where it slashed full-year revenue growth guidance, along with Hindustan Unilever. Other stocks also saw profit taking after recent run-up.
The market participants were hoping for 20,000 mark in the opening as it was just few points away from that mark, but Infosys played spoilsport. The Nifty50 opened at 19,800 and corrected up to 19,700 levels. At final, the index dropped 234 points or 1.17 percent to 19,745 and formed bearish candlestick pattern on the daily charts, breaking below 5-day EMA (19,769) for first time in couple of weeks.
On the weekly scale, the index has seen formation of bullish candlestick pattern with long upper shadow on the daily charts, indicating profit booking at higher levels, but continued making higher highs, for 17th straight week indicating the momentum can continue.
The index is likely to take a support at 19,700 and if the said support gets broken, then 19,350 can be area of crucial support, while the resistance remains at 19,800-20,000 zone, experts said.
"On the daily charts, we can observe that the Nifty has held on to the zone of 19,680 – 19,700 where support in the form of the 50 percent Fibonacci retracement level (19,677) of the rise from 19,361 – 19,992 and the 40-hour moving average is placed," Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas said. During the current up-move, the 40-hour average has always absorbed the selling pressure and held on to start a fresh leg of up-move.
He believes that there can be some consolidation considering the sharp rise it has witnessed in the last few trading sessions.
Overall, "the uptrend is still intact, and we believe that this dip is a pullback and not a trend reversal. In terms of levels, 19,677 – 19,700 shall act as a crucial support zone, and on the upside 19,880 - 19,900 shall act as an immediate hurdle zone," Jatin said.
Options data
Options data also indicated that 19,800-20,000 are expected to be resistance levels for the Nifty in coming sessions, with crucial support at 19,600-19,500 levels.
On the weekly Options data front, we have maximum Call open interest at 19,900 strike, followed by 19,800 and 20,000 strike, with Call writing at similar strikes in similar sequence, whereas the maximum Put open interest was at 19,800 strike, followed by 19,000 strike and 19,500 strike, with Put writing at 19,600 strike, then 19,000 and 19,500 strikes.
Bank Nifty
Bank Nifty also corrected but nicely defended the 46,000 mark, falling 112 points to 46,075 and formed Doji kind of candlestick pattern on the daily charts indicating indecisiveness among bulls and bears about future market trend, but the index continued higher highs, higher lows for yet another session.
During the week, the Bank Nifty has formed long bullish candlestick pattern with minor upper and lower shadows on the weekly charts, as the index rallied 1,256 points or 2.8 percent.
"The index experienced a volatile trading session with both buying and selling pressure seen from market participants on both ends. This volatility indicates indecision in the market, and traders are closely monitoring the price movements," Kunal Shah, senior technical & derivative analyst at LKP Securities said.
The option data suggests that the market may remain rangebound as there is significant option selling observed at the at-the-money (ATM) strikes. Option sellers often anticipate that the market will remain within a specific range during a certain period.
"The lower end support for Bank Nifty is placed at 45,900. If the index falls towards this level and holds, it may act as a support, preventing further downside," Kunal said, adding on the other hand, the upside resistance is visible at the 46,350-46,400 levels.
If the index manages to surpass this resistance area, it could signal further upward movement, he feels.
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