Technical View | Nifty forms Bearish Engulfing pattern on weekly scale, 17,500-17,600 area crucial next week

Trader

The Nifty50 lost more than one percent for the week ended April 21 and formed Bearish Engulfing kind of pattern on the weekly charts, negating higher lows formation of last of last three weeks, but has taken support at downward sloping resistance trendline adjoining highs of December and February.

The said support comes in between 17,500-17,600 levels, hence this area is expected to be crucial for the coming week and if the index breaks the same then there could be correction towards 17,400-17,300 levels, experts said.

For Friday, the index remained directionless and continued to consolidate around 17,600 which coincides with 200-day moving average (DMA - 17,605) for third consecutive session. It again traded within the 100 points range with hitting day's low of 17,550 and closed almost flat at 17,624, down 0.50 points.

The index has formed Doji sort of candlestick pattern on the daily scale for yet another session, indicating the bulls and bears remained indecisive about their future trend.

After correcting from the recent high of 17,863, Nifty has been consolidating around the 200-day moving average for the last three days. So far, the bulls have been able to hold the Nifty above the long-term average of 200 DMA, which is considered the line of polarity for long-term investment, Rupak De, Senior Technical Analyst at LKP Securities said.

He feels a fall below 200 DMA might trigger a panic button. Below 17,600, the Nifty may slip towards 17,400, whereas on the higher end, a resistance is placed at 17,700, above which the index may move towards 18,000, he said.

On the monthly Options front, the maximum Call open interest was at 17,700 strike, which is expected to be crucial area on the upside as breaking of the same can take the Nifty towards recent highs, followed by 18,500 strike, with Call writing at 17,700 strike, then 17,900 strike.

On the Put side, the maximum open interest reflected at 17,000 strike, which is likely to be crucial support if there is any kind of correction in coming sessions, followed by 17,700 and 17,600 strikes, with writing at 17,600 strike, then 17,000 strike.

Hence, the trading range for the Nifty50 in near term is expected to be 17,500 to 17,750 levels.

Bank Nifty has underperformed the Nifty50 but managed to firmly hold on to 42,000 levels on Friday. The index lost 151 points to close at 42,118 and formed small bodied bearish candle on the daily charts.

On the weekly scale, the index closed flat with negative bias, down 14.5 points and formed bearish candle but continued to make higher highs higher lows formation for fourth straight week.

"It has formed a Bearish candle on the weekly scale which suggests selling pressure is visible at higher zones but supports are intact at lower levels. Now it has hold above 42,000 zones for an up move towards 42,500 then 42,750 levels, whereas on the downside support are expected at 41,750 then 41,600 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

India VIX was down by 2.60 percent from 11.94 to 11.63 levels. Overall volatility has dried up and consistently hovering at its lower zones.

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.