Tech View: Nifty enters overbought zone, no signs of weakness yet

Nifty50 on Monday settled higher for the third straight day and formed a bullish candle on the daily chart that resembled a Hanging Man candle, suggesting a possible halt to the ongoing positive momentum. The index has also entered the overbought zone, as suggested by the 14-day RSI, but there are no clear signs of weakness as yet.

The index formed a Hanging Man, even as a perfect formation required a little higher lower shadow than the one registered on Monday, said Mazhar Mohammad of Chartviewindia.in, as he advised traders to book profits and remain neutral on the index.

"On multiple technical parameters, the index reached overbought levels from where a corrective downswing or a pause for a couple of sessions will be required. Hence, weakness in the index can be expected at a close below 17,154 level. In case, if the index sustains above 17,154, and makes an attempt to rally then the upswing can extend towards 17,500," Mohammad said.


For the day, the index closed at 17,340.05, up 181.80 points or 1.06 per cent.

Gaurav Ratnaparkhi of Sharekhan said that while the hourly momentum indicator has developed negative divergence, the price action itself continues to be resilient.

"On July 29, the Nifty50 had scaled above the 61.8 per cent retracement of the April–June decline and the 200 DMA. It is now trading near 61.8 per cent retracement of the entire October 2021 to June 2022 decline i.e. 17,300 and is inching towards the 78.6 per cent retracement of the April–June fall i.e. 17,500," he said adding that the near term support zone shifted higher to 17,100-17,150, with reversal for the bullish stance pegged at 17,000.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities said a minor consolidation or intraday volatility could be expected at the hurdle of 17,400-17,500 and that hurdle could eventually be taken out on the upside in the near term.

"The near term upside targets to be watched at 17,800 level and immediate support is placed at 17,150 level," he said.

Nifty Bank
Kunal Shah, Senior Technical Analyst at LKP Securities said Nifty Bank has continued its uptrend with higher high-low formations on the daily chart.

"The index RSI has now entered overbought territory and some profit booking scenarios cannot be ruled out from the current levels. The index immediate upside resistance stands at 38,000 and support at 37,000 level and might consolidate ahead of the RBI policy," said he.

Chandan Taparia of Motilal Oswal Securities said the index has to hold above 37,777 for an upmove towards 38,250 and 38,500, whereas he sees support being placed at 37,500 and 37250 levels.

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