Tech View: Nifty forms bearish candle; has counter-trend rally ended?

The Nifty, with a gap-up opening, attempted to cross the hurdle of 17,600 on the upside. However, it couldn’t sustain itself in the higher territory. The hourly chart shows that the index faced resistance near the upper end of a rising channel, said an analyst.

“On the daily chart, the index has formed a Popgun pattern, which makes today’s high of 17,639 a key resistance. The overall structure shows that the short-term consolidation is likely to continue further before the index prepares for a larger up-move. On the downside, the Nifty is expected to fill up a recent gap area, which is near 17,250-17,300,” said Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas.

Barring select technology and banking names, all sectors remained subdued. Bajaj Twins were the biggest losers in the index. Broader market indices also fell. However, the quantum was comparatively lower.

This intraday sell-off of 285 points can be hinting that the counter-trend rally from the lows of 16,782 might have ended,” said Mazhar Mohammad, Chief Strategist – Technical Research, Chartviewindia.in.

“This will be confirmed if Nifty eventually closes below the bullish gap zone of 17,308-251 levels registered on December 8. In that scenario, it may either revisit the recent corrective swing low of 16,782 levels over some time or slip into a corrective and consolidation phase of 17,600-17,000 levels,” he said.

“For the time being, strength in the index should not be expected unless it registers a close above 17,640 levels,” he added.

India VIX, the barometer of future volatility, gained over 3 per cent to 16.57.

Ruchit Jain, Trading Strategist at 5paisa.com said in the options segment, 17,500 and 17,600 call options witnessed decent open interest addition during the day, which also indicates that upside will be capped for this weekly expiry.

As per the data, 17,500 will be seen as an immediate hurdle while 17,300 followed by 17,200 will be the supports to watch out for.

“Considering the above data and the chart structure, which indicates that the recent up move was corrective in nature rather than an impulse, we expect some time-wise or price-wise correction for the next couple of days. Hence, traders are advised to avoid aggressive bets and trade with a stock-specific approach,” Jain said.