Technically, the Nifty on a daily scale has formed a red candle indicating weakness on Friday. However, the index managed to defend the recent swing low of 22,980.
“Till the index holds the level of 22,980, short-term pullback towards 23,300-23,400 could be possible. On the flip side, sustaining below the recent swing low of 22,980 could lead to weakness towards 22,850-22,800 levels. On the upside, the 250-day Simple Moving Average (250-DSMA) hurdle is placed around 23,600 levels, which will act as major resistance for the index. Thus, a sell-on-rise strategy should be adopted in Nifty,” said Hrishikesh Yedve of Asit C. Mehta Investment Interrmediates.
According to the open interest (OI) data, the highest OI on the call side was observed at 23,200 and 23,300 strike prices, while on the put side, the highest OI was at 23,000 strike price followed by 23,100.
What should traders do? Here’s what analysts said:
Jatin Gedia, Mirae Asset SharekhanNifty witnessed selling pressure emerge from the upper end of the broad range 23,350 – 23,400 and slipped to close in the negative down 113 points. Since the past four trading sessions, the Nifty is trading in the broad range of 23,000 – 23,400. Divergence among the daily and hourly time frame momentum indicators can lead to further consolidation. Bollinger bands are contracting also suggesting a rangebound movement. Thus, until the Nifty does not breach the support zone of 23,050 – 23,000, we can expect the rangebound price action to continue. Stock-specific weakness in the broader market is visible as the smallcap index and midcap index were down 2.35% and 1.55%, respectively. On the Nifty a breach below 23,000 could lead to a fall towards 22,670, which coincides with the 38.2% Fibonacci retracement level of the rise from 16,828 – 26,277.
Nagaraj Shetti, HDFC Securities
After the formation of the Doji pattern in last week, the market was not able to show any significant upside bounce this week and closed lower by 0.5%. Hence, the bullish implication raised after the Doji could be nullified. The near-term trend of the Nifty remains weak. A slide below the immediate support of 22,975 levels could open the next downside towards 22,800 levels. Any upside bounce towards 23,350-23,400 could be a sell-on-rise opportunity.
Praveen Dwarakanath, Hedged.in
Nifty formed an inverted red hammer candle, indicating weakness in the index to continue. The index sold off during the day after a bounce from its immediate support at the 23,000 level. The momentum indicators are well below the oversold region, which can be a possible reason for the bounce. However, one can sell the index on every rise, until the resistance at the 23,800 level is not taken off. Options writer’s data for the January monthly expiry showed increased writing of the calls at the 23,100 and above levels, indicating a bearishness in the index.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
