The nifty fell for the second straight session and settled below the 18,300 level on Friday. The bearish candles on the daily and weekly charts were formed by the NSE barometer. The candles had long upper wicks, suggesting that they were selling at higher levels. Analysts said the 50 pack index had broken below the immediate support of 18,350 and it is likely to see a further fall before making a recovery.
The bearish candle on the daily chart indicated pressure at higher levels, and Chandan Taparia of Motilal Oswal Securities said the 50-pack index broke its immediate support of 18,350.
It formed a bearish candle on the weekly frame and negated its higher lows of the last two weeks. If it holds below 18,350, weakness could be seen towards 18,081 and 18,000 zones while hurdles are placed at 18,350 and 18,442 zone, Taparia said.
For the day, the index closed at 18,269, down 145.90 points or 0.79 per cent. The index was down 227.60 points or 1.23 per cent for the week.
Since the market was heavily overbought, we must consider this as a running correction. On the flip side, 18,450 -- 18,600 are to be treated as immediate hurdles. If the bulls have to regain their strength, 18,450 needs to be surpassed with some authority, which will negate the breakdown from the small head and shoulders pattern on the daily time frame chart.
Traders are advised to stay light for a while. The market should either complete its correction first or reclaim key levels on the upside to resume the bullish trend, said Sameet Chavan, Angel One.
Independent analyst Manish Shah said that the Nifty fell from 18,650 to 18,250 in two days.
The decline from the 18,900 high is breaking down in three swings, making it a possible AB CD pattern. The PRZ Potential Reversal Zone is located at 18,150 -- 18,100. Before the Nifty turns up, there could be another 100 odd point decline from current levels. The Nifty has dropped by almost 600 points from the highs, making it slightly oversold, Shah said, adding that the NSE barometer needs to break above 18,710 for a reliable signal.
Amol Athawale, Deputy Vice President Technical Research at Kotak Securities said that the double top formation on the daily chart and double top reversal formation on the intraday chart indicates further downside from the current levels.
The Nifty did not break the important support level of 18,400, but was below the same. The next support level for the index would be the 50 day SMA or 18,100 -- 18,000 levels. On the flip side, 18,400 could act as an immediate resistance zone for the index, and above the same, the index could test the 20 day SMA or 18,550. In case of further upside, the index could move up to 18,700, Athawale said.