Nifty50 Forms ‘Short Bearish’ Candle; Support Likely at 8,741
timesinternet.in New Delhi: The Nifty50 snapped a four-day winning streak on Tuesday to form a ‘short bearish’ candlestick pattern on the daily chart, signalling confusion among traders as they geared up for the outcome of the Reserve Bank of India’s (RBI) twoday policy review on Wednesday.
The 14-day relative strength index still hovered in the overbought territory, but the downside looked capped. The index is expected to see support around its Tuesday’s low of 8,741, while the immediate resistance is seen at the 8,820 level. To confirm any trend reversal, the index needs to break below the 8,700 level on a closing basis. The 50-pack index tumbled as soon as it opened on a negative note.
The NSE barometer kept falling before it found some support near its five-day exponential moving average (EMA) at 8,740. The index recouped losses towards the end of the session to eventually settle at 8,768, down 32.75 points, or 0.37%.
“The bulls are exhausted after a 1,000-point rally from the December lows. A short-term correction cannot be ruled out,” said Mustafa Nadeem, CEO, Epic Research.
Sameet Chavan, Chief Analyst for Technicals & Derivatives, Angel Broking, said Tuesday’s low of 8,741 would be seen as a key support level in the forthcoming session as a sustainable move below it may lead to further intraday correction towards the 8,707-8,685 region.
“On the flipside, 8,820 would act as an immediate hurdle and surpassing this point would extend the rally towards the next milestone at 8,900. Despite a small dip, we would interpret this as a part of the consolidation phase and, hence, traders should keep following stock-centric approach with a positive bias,” Chavan said.
Kunal Bothra, independent market analyst, believes since the Nifty50 has respected the 8,741 level, it might see a decent uptrend over the next couple of days. “If the indices open softer again on Wednesday, one should probably take it as an opportunity to buy,” Bothra told ETNow. Dr CK Narayan, Founder, Chart Advise, noted that the movement from opening to close has been very limited in the past few sessions, which has led to formation of small body candles on the daily chart.