Nifty failed to extend gains for the fifth consecutive session on July 5 and closed sharply lower as traders preferred profit booking after the presentation of the Budget.
The index ended way below 11,900 and formed large bearish candle on daily charts while for the week it gained 0.2 percent and as it saw a formation of Shooting Star, which implies that selling pressure was seen at higher levels.
A 'Shooting Star' pattern is formed when the index comes under selling pressure as traders start booking profits at higher levels. This pattern is usually formed in an uptrend and is treated as a reversal pattern, but it would require confirmation before we can conclude that the trend will get reversed in the near future.
Considering the trend, the market could remain rangebound in coming sessions, feel experts who advised creating fresh short positions on any rebound if it happens.
Nifty started trading on a positive note at 11,964.75 and hit an intraday high of 11,981.75, but failed to hold on to those gains and slipped in the red in the morning itself. The index hit day's low of 11,797.90 before recovering to close 135.60 points lower at 11,811.20.
Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in said as of now it clearly appears that top is placed around 12,000, and hence, any tepid bounce in next session can be an opportunity to consider fresh short positions as Nifty appears to be heading to test its 50-day moving average (11,727).
He further said in the recent past, Nifty took support on the said average. Its failure to defend the same now can open up bigger downside targets. In that scenario, the initial destination for bears can be 11,625, he added.
Meanwhile, upsides shall remain capped around 11,982 and hence for any short positions, ideal stop loss level shall be a close above 11,982, he said.
India VIX fell 3.75 percent to 13.02. Decline in VIX even after the fall in the index indicates that support could be respected, experts said, adding options data suggests a trading range of 11,600-12,000.
For Nifty options, maximum Put open interest (OI) was at 11,500 followed by 11,300 strikes while maximum Call OI was at 12,000 followed by 12,500 strikes. Put writing was seen at 11,400 then 11,700 strikes while meaningful Call writing was seen at 12,000 followed by 12,200 strikes.
Bank Nifty outperformed broader indices and turned sharply from its crucial support of 31,313. The index closed 3.95 points higher at 31,475.80 and formed a Spinning Top candle on daily as well as on weekly scale near its lifetime high, which implies follow up is missing at higher levels, an expert said.
"It has to continue to hold above 31,313 to extend its gains towards 31,780 while on the downside supports are seen at 31,150 then 31,000," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
