After a positive opening, Nifty ended down 68 points to form an Engulfing Bear candlestick pattern on the daily chart but has been making higher highs from the last three sessions.
The formation of a high wave pattern on Wednesday and bearish engulfing pattern of Thursday indicates a short term top reversal pattern, said Nagaraj Shetti of HDFC Securities, adding that both price and momentum indicators are suggesting weakness in the near term.
Now the index has to hold above 18676 zones to witness an up move towards 18777 and 18888 zones while on the downside support exists at 18636 and 18550 zones, said Chandan Taparia of Motilal Oswal.
India VIX was down by 0.72% from 11.16 to 11.08 levels. Volatility was slightly down and is at overall lower levels causing premiums to squeeze.
Option data suggests a broader trading range in between 18450 to 18900 zones while an immediate trading range in between 18600 to 18800 zones.
What should traders do? Here’s what analysts said:
Jatin Gedia, Technical Research Analyst, Sharekhan by BNP Paribas
The range of consolidation is likely to be 18800 – 18500. The 20-day moving average which has been holding out during this rally is placed at 18532 and so only a decisive break below that shall reverse the trend. In terms of levels, 18780 – 18800 shall act as an immediate hurdle zone while 18530 – 18500 is the crucial support zone to watch out for shall act as a crucial support zone while 18778 – 18800 shall act as an immediate hurdle zone.
As far as Bank Nifty is concerned, the index has decisively broken the consolidation range of 44000 – 44500 on the downside and is likely to head lower over the next few trading sessions. In terms of price pattern, the Bank Nifty has formed a Distribution triangle pattern which has been breached on the downside. On the downside, we expect the Bank Nifty to target levels of 43000.
Rupak De, Senior Technical at LKP Securities
The Relative Strength Index (RSI) is showing negative divergence, indicating weakening bullish momentum. Over the near term, Nifty may decline towards the 18550 level. On the higher end, there is resistance expected at the 18750 level.
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