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Thursday, June 24, 2021

Tech View: Nifty forms indecisive candle, losing momentum rapidly

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NEW DELHI: Nifty50 on Friday formed an indecisive candle on the daily scale with long upper wick, and a ‘Bearish Engulfing’ candle on the weekly scale.

The index slipped below its 20-day exponential moving average (EMA), signalling further loss of momentum. Analysts said the index needs to stay above the 11,300 level to avoid a steep fall next week.

Check out the candlestick formations in the latest trading sessions

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Sacchitanand Uttekar of Tradebulls Securities said the index saw concealed action within its Monday’s long bearish bar, throughout the week. He believes the index needs to hold above 11,300 level for the bulls to make a comeback towards the 11,650-11,750 zone.

“A breach of this critical support can lead to a further drag towards the 11,100-11,050 zone in the coming weeks. Momentum oscillator RSI-14 is showing loss in momentum. Nifty has closed below its 200-DMA, for the first time after May 28, which also showed loss of momentum. It’s ideal to remain vigilant and trade cautiously. For the coming week, Nifty50’s range seems to have shifted towards the 11,650-11,150 zone,” Uttekar said.

For the day, the index closed at 11,333, down 193 points or 1.68 per cent. The 14-day RSI is now just above its crucial mark of 50, making lower-high and lower-low after reaching the overbought zone.

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Chandan Taparia of Motilal Oswal Securities said the intraday bounce during the day got sold into. “The index negated the formation of higher lows of last three sessions and formed a Bearish Engulfing pattern on the weekly scale, which has bearish implications, if follow-up selling occurs. The index is facing multiple hurdles in the 11,450-11,550 zone and as long as it remains below the same level, weakness could be seen towards 11,200 and 11,111 levels,” Taparia said.

Mazhar Mohammad of Chartviewindia.in said a close below the 20-day EMA is clearly confirming that trend might have decisively reversed in the favour of bears.

“Hence, unless Nifty50 closes above 11,584 level, all the rallies shall be used to create short positions. On the downsides, a breach of 11,300 in the next session can drag down the Nifty initially towards 11,111 level with eventual targets placed around 11,000 level. A close above 11,450 level can be considered as an initial sign of strength,” Mohammad said.

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