Nifty formed a bearish engulfing pattern on the daily chart. A bearish engulfing pattern consists of two candles. One candle is usually a small candle which is followed by a large black or red candlestick pattern that engulfs the short one or the previous candle.
Nifty opened at 18602 and hit a record high of 18604 but, selling pressure, especially after HUL’s earnings announcement, saw the Nifty close 58 points lower at 18418, snapping a seven day winning streak.
Nifty started off the day above 18600 but failed to sustain the momentum due to selling pressure in FMCG, metals, pharma and some banking & financial stocks.
Market breadth too was weak with declines outpacing advances led by the big names of the FMCG sector as the street awaits a slew of primary market offerings in the near term.
Broader markets clearly witnessed profit booking in several top performing midcap names during the day.
Indian market was showcasing strong resilience however the stretched rally booked some gains by the end of the trading day. IT sector continued to hold the gains while the rest of the recent performers like Realty, PSUB & Auto went into a sell-off.
Signs of reversal appear to be cropping up as the Nifty registered a bearish engulfing formation after witnessing a strong gap up opening.
Nifty needs to sustain above 18350 in the near future to prevent severe damage. If the index fails to sustain above 18350 in the next session on a closing basis then there is a high chance of registering a near term top at today's high of 18604 level. In that scenario, eventually the index can fall up to 18050 level.
If the bulls manage to buy the current dip and push the index beyond 18600, one should expect a higher target of 18900 level.
For the time, however, It would be prudent for participants to avoid buying the current dip unless the market shows some signs of stability with upward strength.
If the Nifty consolidates for the next few days without seeing a major correction, there is a fair chance of it gaining strength and marching toward the 18900 mark.
Sector Wise :- Except IT and Capital Goods, all other sectoral indices ended in the red. Midcap and smallcap lost over 1 percent each.
Bank Nifty closed 144 points down at 39540 and formed a bearish engulfing pattern on the daily chart.
Bank Nifty also opened gap up at 39927 and crossed the 40000 mark in the initial tick, hitting a new high at 40011. Bank Nifty however, failed to hold above 40000 and witnessed profit booking to fall to 39394.
Bank Nifty appears to be trading inside the well defined 39 day old ascending channel and interestingly, at today's high of 40011, it tested the upper boundary of the said channel and registered a Bearish Engulfing formation.
If it slips below 39340 in the next session, it can attract a follow through selloff hinting at a short term top around 40000.
Traders should therefore remain neutral for the day on the long side, whereas positional selling can be considered on a close below 39390 for an initial target of 38670.