Tech view: Nifty forms bearish candle; market ripe for sell-on-rise opportunity

The index opened at 17,939.35 and hit a high of 18,022.65 before plunging to the day’s low of 17,879.25. Eventually, the index ended the session at 17,898.65, down 100.55 points over the last close.

“A negative candle was formed on the daily chart with upper shadow. This pattern indicates a sell-on-rise opportunity in the market and the weakness seems to have gathered strength in the last couple of sessions. This is not a good sign for the bulls to make a sharp comeback,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

The minor positive pattern like higher highs and higher lows on the daily chart remain intact. But, the market is now close to the edge of negating this positive sequence, said analysts adding a move below 17,800 is likely to negate this pattern and could open more weakness.

“The short term trend of Nifty is down and the bears have started to participate actively in the market. The next important support for bulls is around 17,750 and a move below this area is likely to trigger sharp weakness in the near term. Minor upside bounce from the lower support is not ruled out in the short term,” said Shetti.

The major cause of worry is that the markets witnessed selling pressure at higher levels as investors seem to be trimming their holdings in stocks that had risen sharply in the recent upsurge.

“While the intraday texture is weak, for bulls, the 50-day SMA at 17,790 could act as a key support level. For day traders, the correction wave is likely to continue up to 17,850-17,790. Contra traders can take a bet near 17,790 with strict support stop loss at 17,750,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

On the hourly technical chart, the index has reached the lower end of the rising channel with a minor breach on the downside. Going ahead, the junction of 40-DEMA and the swing low on the daily chart, which is near 17,800 will be the key support to watch out for, said analysts.