NEW DELHI: The Nifty50 snapped a four-day winning streak on Wednesday, but continued the trend of forming higher lows for another session.
Analysts noted that the index was losing momentum and that the risk-reward ratio was turning favourable, even as the candles formed on the daily chart â a small bearish pattern â failed to signal any trend reversal.
The Nifty50 opened higher but lost momentum soon after. The index hit a high and low of 9,631 and 9,581, respectively, before eventually closing the day at 9,621, down 3 points, or 0.03 per cent.
âThe Nifty50 formed a âsmall bearishâ candle, which resembled a âSpinning Topâ. Price action of last five sessions clearly suggests that the Nifty50 was losing momentum, as the daily trading range is progressively becoming narrower, which may be signalling that a correction is around the corner,â said Mazhar Mohammad, Chief Strategist â Technical Research & Trading Advisory at Chartviewindia.in.
However, Sameet Chavan of Angel Broking expects the prevailing consolidation phase to continue. He advised traders to keep booking profits in the 9,620-9,720 range.
âFor the coming session, the 9,581-9547 range remains immediate support zone for the index. Traders should look to use intraday dips as a buying opportunity around these support levels,â Chavan said.
Mohammad said the momentum oscillators generated a sell signal, accompanied by a confirmed negative divergence on the RSI chart. He advised traders to square off long positions, if the Nifty50 were to close below 9,600.
Chandan Taparia of Motilal Oswal Securities said if the index negates the formation of higher lows, only then a small decline could be seen in the index.
âBut the major trend may remain intact as long as the Nifty50 holds above the previous swing high of 9,532. The index needs to hold above the 9,635-9,650 zone to witness a bounce towards 9,700 and 9,750 levels. If it slips below 9,580, it may head towards 9,550 and 9,532 levels,â Taparia said.