On Monday, Nifty started off the session with modest gains. However, this turned out to be a formality, owing to the favourable global cues.
Interestingly, Nifty formed open=high and also, the prior bar high stood at 11,225 level. Soon after this, the index started to slide lower and touched the low of 11,087, which was the lower Bollinger band.
After taking support around the lower Bollinger Band, the index recovered nearly 45 points from the day’s low. At the end of the day, Nifty closed at 11,131.8 with a net loss of 0.56 per cent.
The price action on the daily chart resembles a bearish belt hold pattern. It also resembles a bearish engulfing pattern. Nifty is still trading within the high-low range of the hanging man candle, which was formed on July 22. It’s important for the price to breach on either side of this range for a directional move. Even though the price is trading in a range, the indicators are reflecting some signs of weakness.
The MACD histogram further declined. For the last five days, the stochastic oscillator turned down. And finally, the positive directional movement indicator (+DI) is also turning down. Even though the indicators are gesturing weakness, it needs to be confirmed by price and this would happen only if the support level of 11,058 is breached on the downside. On the upside, the zone of 11,225-11,240 is likely to act as a resistance.
It’s time to wait and watch the trades as a breach on either side of the range would result in a trending move. Bollinger band on the hourly time scale is seen contracting. So, closely monitor the range of 11,058-11,240.
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