Technical View - July 31, 2020 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
After showing sharp weakness from the highs in the last couple of sessions, Nifty shifted into a consolidation on Friday and closed the day on a slightly negative note. A small negative candle was formed on a daily chart with long lower shadow. Technically, this pattern indicates emergence of minor buying from the lower supports.
The immediate support of 11100 has been broken on the downside on Friday, but Nifty failed to pickup downside momentum below that support. This pattern could raise doubt over the downside breakout of the sideways range of the last few sessions.
The broader positive sequence of higher highs and low continued in Nifty as per daily timeframe chart. Today's swing low of formation with in a range movement of the last seven sessions could signal possible formation of new higher low formation on Friday. But, we need clear evidence of upmove to call this as a higher bottom reversal.
Similar type range movement and failed upside and downside breakout action was formed during 7th to 16 July 2020 and eventually Nifty witnessed upside bounce from the lows. Hence, one needs to be careful about the unfolding of such positive pattern in coming sessions. The low of 11000 is going to be crucial support area as of now.
Nifty on the weekly chart formed a small negative candle with minor upper shadow. The formation of such weekly candle pattern at the crucial overhead resistance of 11300-11350 levels could signal lack of selling enthusiasm among participants. This is even after a sharp trended upmove of the last one month and after placing near the key upside resistance. Such market patterns eventually results in an upside breakout of the hurdles.
The short term trend of Nifty is slightly negative amidst a range movement. Important lower supports to be watched for the resumption of downtrend is at 11000 levels. The overall pattern signal a possibility of upside bounce from here or from the lows. Immediate resistance for the next week is placed around 11300-11350.