Tech View: Nifty forms bearish engulfing pattern ahead of expiry. What traders should do on Thursday
Nifty on Wednesday ended 142 points weaker to form a Bearish Engulfing pattern on the daily chart, indicating a potential pause in the ongoing rally.
The bullish chart pattern like higher tops and bottoms continued as the per daily timeframe chart and Wednesday's swing high of 22,249 could now be considered as a new higher top of the sequence. Hence, short-term weakness could be expected and the next lower supports to be watched at 21,850-21,750 levels, said Nagaraj Shetti of HDFC Securities.
Open Interest (OI) data showed the Call side had the highest OI at 22,200, followed by the 22,300 strike prices. On the Put side, the maximum OI was observed at the 21,800 strike price.
What should traders do? Here’s what analysts said:
Rupak De, LKP Securities
The momentum indicator RSI is showing a bearish crossover, signalling weakness in the near term. Immediate support is positioned at 22,000. A decisive drop below this level could lead the index towards 21,700. On the upside, resistance is identified at 22,160.
Tejas Shah, Technical Research, JM Financial & BlinkX
Nifty was unable to close above the crucial resistance zone of 22,125-150 (previous ATH area) for two consecutive days, which is not a positive sign. The follow-up buying was missing/lacking in Tuesday’s trading session. On the downside, 22,000 / 21,800 are two important supports and only if these levels are broken then the short-term set-up turns slightly weak. On the higher side, the immediate resistance zone is at 22,125-150 levels (Previous ATH area) and
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