After the carnage on Dalal Street with the Nifty50 hitting 200-day EMA (exponential moving average of 18,830) for the first time since April this year and the formation of Three Black Crows candlestick pattern on the daily charts, the bearish pattern, will there be more correction or any possibility of bounce back given the momentum indicator RSI (relative strength index at 26.74 levels) looking oversold?
According to experts, any rebound is unlikely to be sustainable in the near term given the bearish sentiment and the index can drift towards 18,600-18,500 in the coming days.
"One may observe three long bear candles in the last three sessions, which is indicating a bearish three black crows’ pattern, which signals a downtrend continuation pattern for the short term," Nagaraj Shetti, technical research analyst at HDFC Securities said.
The Nifty50 plunged 1.4 percent or 265 points to 18,857 on October 26, the expiry day for the monthly futures and options contracts, but the breadth has seen some improvement compared to the previous two sessions. Three shares declined for every two rising shares on the NSE on October 26, against 12 shares declined for every rising share on October 23.
"Though the Nifty is placed at the key moving average supports, still there is no indication of any reversal pattern building up at the lows," Nagaraj feels.
The negative pattern like lower tops and bottoms of a larger degree is intact on the daily chart and the market finding support to form a new lower bottom of the sequence. Still, there is no indication of any bottom formation at the lows, he says.
Hence, he feels the short-term trend of Nifty continues to be negative. "Having moved into an oversold region, there is a chance of upside bounce occurring from the lows. A decisive move below 18,800 levels could open the next downside of 18,500-18,600 levels in the near term," Nagaraj said.
Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas said considering that Nifty has reached a support zone and is appearing oversold on the hourly charts, one can expect a pullback till 19,000–19,050, however, it is likely to be only a temporary pause in the overall downtrend.
On the downside, he feels the Nifty is likely to drift towards 18,500 levels in the short term. And the intermediate pullbacks should be used as a selling opportunity, he advised.
The BSE Sensex tanked over 900 points to 63,148, while on the broader markets front, the Nifty Midcap 100 index fell 1.2 percent and Smallcap 100 index was down 0.3 percent.
We have collated 15 data points to help you spot profitable trades:
Note: The open interest (OI) and volume data of stocks are the aggregates of three-month data and not just the current month.
Key support and resistance levels on Nifty
The pivot point calculator indicates that the Nifty may take support at 18,834, followed by 18,786 and 18,708. On the higher side, 18,990 can be the immediate resistance followed by 19,038 and 19,116.
On October 26, the Bank Nifty also extended selling pressure for the third consecutive session and formed Three Black Crows candlestick pattern on the daily timeframe. The index is very close to its near-term support of the 42,000 mark, which coincides with a long upward-sloping support trendline. If the index breaks the same then there could be more downtrend in the index, but given the RSI looking oversold (25.80 levels), the possibility of a rebound can't be ruled out in the coming session, experts said.
The index dropped 552 points or 1.3 percent to 42,280.
"Bank Nifty is heading towards the psychological support of the 42000. The fall has been very sharp and is appearing oversold which increases the probability of a pullback. The pullback can be expected till 42,500 – 42,600 however it is unlikely to result in a trend reversal," Jatin Gedia said.
Overall, he feels the trend is negative and expects it to target levels of 40,850 from a short-term perspective.
As per the pivot point calculator, the banking index is expected to take support at 42,134, followed by 41,990 and 41,756. On the upside, the initial resistance is at 42,601, then at 42,745 and at 42,978.
As per monthly options data, the maximum Call open interest (OI) was at 18,900 strike with 1.01 crore contracts, which can act as a key resistance for the Nifty. It was followed by the 20,000 strike, which had 82.72 lakh contracts, while the 19,000 strike had 78.54 lakh contracts.
Meaningful Call writing was seen at 18,900 strike, which added 1 crore contracts, followed by 19,000 and 18,800 strikes, which added 63.87 lakh and 52.45 lakh contracts.
Maximum Call unwinding was visible at 19,200 strike, which shed 72.56 lakh contracts, followed by 19,300 and 19,400 strikes, which shed 72.14 lakh and 60.03 lakh contracts.
On the Put side, the maximum open interest was at 18,800 strike with 1.03 crore contracts, which can act as key support for the Nifty in the coming sessions.
It was followed by 18,500 strike comprising 65.51 lakh contracts and 18,000 strike with 53.25 lakh contracts.
Meaningful Put writing was at 18,800 strike, which added 31.56 lakh contracts followed by 18,500 strike and 18,400 strike, which added 15.58 lakh and 7.22 lakh contracts.
Put unwinding was at 19,000 strike, which shed 1.05 crore contracts followed by 19,100 strike and 19,200 strike, which shed 61.3 lakh and 32.43 lakh contracts.
Stocks with high delivery percentage
A high delivery percentage suggests that investors are showing interest in the stock. UltraTech Cement, Hindustan Unilever, Dabur India, Larsen & Toubro and Godrej Consumer Products saw the highest delivery among the F&O stocks.
Here are the top 10 stocks which saw the highest rollovers on the monthly expiry day including SBI Cards & Payment Services, Adani Ports, PI Industries, Ambuja Cements and Alkem Laboratories with over 98 percent rollovers.
A long build-up was seen in Punjab National Bank. An increase in open interest (OI) and price indicates a build-up of long positions.
Based on the OI percentage, 155 stocks, including Dr Lal PathLabs, Delta Corp, RBL Bank, Navin Fluorine International and ONGC saw a long unwinding. A decline in OI and price indicates long unwinding.
A short build-up was seen in 8 stocks, including HDFC Bank, Indian Hotels, Manappuram Finance, DLF, and IndusInd Bank. An increase in OI along with a fall in price points to a build-up of short positions.
Based on the OI percentage, 23 stocks were on the short-covering list including Laurus Labs, Samvardhana Motherson International, MCX India, M&M Financial Services and Bosch. A decrease in OI along with a price increase is an indication of short-covering.
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Results on October 27 and October 28
Stocks in the news
Axis Bank: The private sector lender said the board of directors has approved the appointment of Munish Sharda as a Whole-time Director, designated as Executive Director of Axis Bank, for three years, with effect from November 1.
Colgate Palmolive: The oral care company has registered a 22.3 percent on-year growth in profit at Rs 340 crore for the quarter ended September FY24, driven by strong and better-than-expected EBITDA margin driven by pricing and efficiencies. Revenue from operations grew by 6 percent year-on-year to Rs 1,471 crore for the quarter.
Lemon Tree Hotels: The company has signed a license agreement for a 50-room property in Visakhapatnam, Andhra Pradesh under the brand Red Fox Hotels. The hotel is expected to be operational by FY 2026.
Kamat Hotels: The company has concluded the sale of its unit Hotel IRA by Orchid in Mumbai, to Lateral Hospitality for Rs 125 crore.
NLC India: The coal mining company has recorded consolidated profit at Rs 1,085 crore for the quarter ended September FY24, rising 164 percent on-year due to a one-time gain of Rs 1,278.5 crore. Revenue from operations for the quarter at Rs 2,978 crore fell by 14.66 percent compared to the same period last year.
Karnataka Bank: The bank said the board has approved the allotment of Rs 800 crore worth of shares to HDFC Life, Bajaj Allianz Life Insurance, Quant MF, Bharti AXA Life Insurance and Bajaj Allianz General Insurance on a preferential basis.
Fund Flow (Rs Crore)
Foreign institutional investors sold shares worth Rs 7,702.53 crore, while domestic institutional investors bought Rs 6,558.45 crore worth of stocks on October 26, provisional data from the National Stock Exchange showed.
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