Technical View - Aug 6, 2021 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities

After the formation of doji type candlestick pattern on the daily chart on Thursday, Nifty slipped into minor weakness amidst a range bound action on Friday and closed the day lower by 56 points. After opening on a positive note, the market made an attempt to move up in the early part of the session. The profit booking has emerged from the day's high of the 16336 levels and the Nifty later showed a range bound action with weak bias for the better part of the session and closed near the lows.

A small negative candle was formed on the daily chart on Friday, after a doji type candlestick pattern of Thursday. Technically, this action indicate a minor reversal pattern at the new highs. But, the overall trend of the market was more of a choppy than any trended decline. Hence, any sharp weakness from here is ruled out.

After the technical upside breakout of the important high low range, the underlying showing consolidation or minor weakness from the highs could be a part of the uptrend continuation pattern. After such weakness near to the upside breakout point (around 16100-16200 in Nifty), the underlying more often shows sharp upside bounces from near the support as per the concept of change in polarity. Hence, the present downward correction is likely to be a buying opportunity for the near term.

Nifty on the weekly chart has formed a long bull candle, after a narrow range movement of previous 4-5 weeks. This is positive indication and signal a decisive upside breakout of the range movement.

Conclusion: The Nifty seems to have started consolidation or minor downward correction from the highs, as anticipated and this consolidation movement is likely to extend towards early part of next week. The important lower supports to be watched for next week around 16200-16100 levels and that is going to be a buy on dips opportunity. We expect sharp upside bounce from the dips by mid to later part of next week. On a decisive move above 16350, Nifty may head towards 16500 levels.

Source : Equity Bulls

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