Technical View - July 28, 2021 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
(Time Zone: UTC)
Nifty witnessed a high volatility of up and down moves on Wednesday and finally settled the day lower by 37 points. After opening on a positive note, the market showed sharp intraday weakness in the early-mid part of the session. A fine upside recovery has emerged from the day's low of 15513 and the market erased most of the intraday loss towards the end.
A small negative candle was formed on the daily chart with long lower shadow. This pattern signal a formation of hammer type candlestick pattern. Normally, a formation of such hammer pattern after a reasonable decline or near the crucial supports could act as an upside reversal on the confirmation. Hence, there is a possibility of an upside bounce in the next 1-2 sessions.
On the daily chart, Nifty has been moving in a sequence like three days decline during its broader range movement. Today's weakness and later upside recovery seems to have completed the negative sequence of three sessions of weakness. One may expect upside bounce from the lows, as per high low range movement. On the upper side 15900 could be an immediate resistance.
The Nifty has formed a swing low near the lower end of a broader range movement and we observe lower low formations. This signal a display of high volatility during weakness and we notice sharp upside bounces soon after such moves in the past.
The crucial weekly support of 10 period EMA is intact after a false break below this support at 15630, as per weekly timeframe chart. This is positive indication.
Conclusion: The short term trend of Nifty continues to be negative. But, the formation of hammer type pattern at crucial support and sharp intraday upside recovery from a lower range are pointing towards an upside bounce in the market in the next 1-2 sessions. The expected upside is likely to test the upper resistance of 15860-15900 levels in the near term.