Tech View: Nifty forms bearish candle; a fall below 16,000 may attract selling

Nifty50 on Tuesday formed a small bearish candle on the daily chart and moved below its 50-day simple moving average. Analysts said the index has failed to see a follow-up buying after recently breaking out of a strong hurdle. They believe a lack of strength is a cause of concern and that the support of 16,000 will be crucial for the index to sustain recent positive momentum.

After a short-term bounce, the Nifty50 reached the junction of its daily upper Bollinger Band, the upper end of a falling channel on the daily chart as well as upper end of a rising channel on the hourly chart, from where it stepped into a brief consolidation mode, said Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan.

In terms of the Fibonacci retracement, the index attempted to stretch beyond 61.8 per cent of the June fall but could not sustain it, Gaurav Ratnaparkhi said.

“The 16,000-16,275 range is a tight consolidation range. The index is now approaching the lower end of the consolidation range i.e. 16,000 that needs to be monitored closely on a closing basis. A breach of 16,000 on a closing basis will drag the index into a short-term correction mode,” he said.

Nagaraj Shetti, Technical Research Analyst at

Securities, said the underlying trend of Nifty50 seems to have turned down for short-term correction.

For the day, the index closed at 16,058.30, down 157.70 points or 0.97 per cent. During the day, the index managed to sustain above the 16,000 level. The 50-pack index hit a low of 16,031.15 intraday.

“Nifty50 showing lack of strength post the upside breakout of resistance and the presence of an important hurdle of down gap resistance at 16,170 levels signal more weakness ahead for the market. A decisive move below the next support of 15,900 could open more weakness for the Nifty50 ahead,” he said.

The index has taken support at 50-DMA on a closing basis. The 50-DMA value stands at 16,063.

“For Wednesday and the day after until weekly the options expiry, watching Nifty50 price behaviour against 16,000 will be crucial. This level is not only important pattern support but the highest PUT open interest (OI) for the current weekly expiry is also at this level. Any slip below 16,000 will invite incremental weakness,” said Milan Vaishnav, Founder & Technical Analyst at Gemstone Equity Research.

Nifty Bank
Independent Analyst Manish Shah said the index has paused after six days of the rally. In the last three days, Nifty Bank has stayed in the range of 35,500-35,000. MACD is bullish, and the price is above its 20-day average, he said. “Expect Nifty Bank to see a rally to 37,150-37,100 in the near term,” Shah said.

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