Nifty on Thursday took its losing run to the seventh straight session and formed a large bearish candle on the daily chart. The index continued with recent its lower high-low formations and was near its oversold zone, as suggested by the 14-day RSI (relative strength index) value of 32.
A value below 30 is considered oversold.
Analysts said the 200-day simple moving average (SMA), at around 17,000 level, may continue to pose as strong resistance while they believe 16,800 level would be crucial level, failing which the index may attract further correction.
“A long bear candle was formed on the daily chart, that has been placed at the edge of important support at 16,800 level. Nifty has been repeatedly testing the lower support of 16,800 but was not gaining momentum on the upside. This is not a good sign, and this reflects that the said support could be broken on the downside soon,” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
For the day, the index closed at 16,818.10, down 40.50 points or 0.24 per cent.
The 50-pack index failed to capitalise on the early gain as it faced tough resistance at the 17,000 level, said Rupak De, Senior Technical Analyst at LKP Securities.
“Going ahead, the 16,800 is likely to act as crucial support and any drift below this level on a sustained basis may attract selling pressure in the market. On the lower end, support is visible at 16,640. On the higher side, the level of 17,050 is likely to remain a strong resistance,” De said.
On the intraday timeframe, said Shrikant Chouhan of Kotak Securities, Nifty has formed a Double Top formation and is consistently taking support at 16,800.
“As long as the index trades above 16,800, the chances of a quick pullback rally is bright. Above the same, the index could retest 16,950-17,000 levels. However, below 16,800, the index could slip till 16,700-16,650.” Chouhan said.