Technical View | Nifty retreats after 6-day run, 18,000 crucial for direction

Market

The Nifty50 fell for the first time in seven consecutive sessions after witnessing a one-way 600-point rally from 17,550 to 18,150, and closed with moderate gains on May 3. We have seen correction in technology, metal, oil & gas, and select banking & financial services stocks.

The index had opened lower at 18,114 and remained in control of bears amid volatility throughout the session. It closed at 18,090, down 58 points, and formed bearish candle with lower shadow on the daily charts.

The profit booking and cautious trade was on expected lines after the six-day run-up and ahead of the outcome of the two-day Federal Reserve meeting tonight. Considering the trend, this is just a normal retreat and the psychological 18,000-mark is expected to act as a crucial area for further direction, hence if it breaks the same then 17,900-17,800 can be possible levels on the downside, whereas on other side, 18,200-18,500 zone on the higher side can be seen, experts said.

The Nifty50 still traded above all key (short term as well as long term) moving averages, so the trend is expected to continue with intermittent correction and consolidation.

"Nifty remained mostly rangebound, following a timid start as the investors await Fed rate decision. On the daily chart a small red bodied candle has formed. The sentiment remains positive as the index has sustained above 18,000," Rupak De, Senior Technical Analyst at LKP Securities, said.

Over the short term, he feels the index is likely to remain in the range of 18,000 to 18,200. A decisive move above 18,200 may take the index towards 18,500, he said.

Ahead of weekly expiry, the Nifty50 has seen maximum Call open interest at 18,200 strike, which is expected to be a crucial hurdle going ahead, followed by 18,100-18,300 strikes, with meaningful Call writing at 18,100 and 18,200 strikes.

On the Put side, the maximum open interest was at 18,000 strike, which is likely to be immediate support for the index, followed by 17,900 & 17,800 strikes, with writing at 18,000 strike, then 17,900 strike.

"Both the indices (Nifty50 and Bank Nifty) going into tomorrow’s expiry have mixed open interest (OI) data as the Nifty OI data shows more Call open interest, whereas the Bank Nifty OI data indicates that more Puts are being written. The indecisiveness is owing to the Fed meeting outcome," Rahul Ghose, Founder & CEO at Hedged said.

After every healthy rally, a consolidation is always a good sign, he feels. "The Nifty index has a lot of demand right from the 17,850 to 17,500 odd levels. So the downside, if any, currently would face support from this level," he said.

Bank Nifty also strongly held to the 43,000 mark. It corrected upto 43,078 levels during the day but showed smart recovery and closed with moderate losses of 39 points at 43,313. The index has formed decent bullish candlestick pattern on the daily scale, with momentum indicator MACD (moving average convergence divergence) showing a nice positive crossover, indicating the trend is still up, though we have small correction today.

"The short-term range remains intact at 43,000-43,500. A decisive move on either side may induce a directional move in the index," Rupak De said.

"Immediate support is visible at 43,150. On the other hand, a move above 43,500 may induce a rally towards 44,000," he added.

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