Tech view: Nifty closes below 25,900, forms long bear candle. How to trade tomorrow

After showing a sustainable up move in the last few weeks, Nifty witnessed sharp profit booking on Monday and closed the day lower by 368 points. After opening with a downside gap of 110 points, Nifty slipped into further weakness in the early to mid-part of the session. There was no significant upside recovery for the day and Nifty closed near the lows.

A long bear candle was formed on the daily chart with a gap-down opening. Technically, this chart pattern is indicating a bearish reversal type candle pattern (a type of bearish evening star- not a classical one). This market action is also signalling a short-term top reversal action for the Nifty, expect for some more weakness in the coming sessions, said Nagaraj Shetti of HDFC Securities.

In the open interest (OI) data, the highest OI on the call side was observed at 26,000 and 26,200 strike prices, while on the put side, the highest OI was at 25,800 strike price followed by 25,700.

What should traders do? Here’s what analysts said:

Rupak De, LKP SecuritiesThe Nifty slipped sharply following a brief pause in the previous trading session, breaking below its recent consolidation. This decline was accompanied by a significant negative divergence in the RSI (14), indicating potential further weakness. Sentiment may remain weak in the near term, with support placed at 25,750. A break below 25,750 could lead to further correction. On the higher side, resistance is seen at 26,000

Hrishikesh Yedve, Asit C Mehta Investment Interrmediates
Technically, on the daily chart, the index formed a red candle and closed below the crucial support level of 26,000, indicating weakness. On the downside, the index will find strong support near its 21-DEMA, placed around 25,540, followed by 25,350. As long as the Nifty remains below 26,000, further weakness will be anticipated. As a result, a short-term “sell on rise” approach is recommended.

Tejas Shah, JM Financial & BlinkX
Technically, the Nifty closed below the level of 26,000 which has been acting as a minor support for the last couple of days. While this is a negative development it’s not something that opens a big downside. The index should now find support around the next major support zone of 25,650-700 and there is a strong possibility that the bulls will put in a fight here. Support for Nifty is now seen at 25,650-700 and 25,450-500. On the higher side, immediate psychological resistance is at 26,000 levels and the next resistance zone is at 26,125-150 levels. Overall, it would be interesting to see whether or not follow up selling occurs in today’s trading session.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)