After an initial fillip that the market got from June quarter GDP data, the gains fizzled out, as NSEs Nifty50 spent most part of the session in rangebound trad e before shedding over 150 points from the days high in the last hour-and-a-half to close 98.15 points, or 0.84 per cent, down at 11582.The index had opened at 11,751 in the morning against the previous close of 11,680.What we saw today was the long overdue corrective move, that was expected.
The market was overbought on both timeframe charts and was visibly overextended.
We have seen the formation of a big engulfing bearish candle.
This has occurred near the high point of the day and, therefore, it is predominantly a bearish signal, said Milan Vaishnav, Technical Analyst, Gemstone Equity Research Advisory Services.We do not see a big bearish move.
The 11,760 level has now become an immediate top for Nifty.
We expect the market to remain subdued and see a healthier correction preparing for the resumption of another rally.
The broader picture and the primary uptrend remain intact, he said.The opening level of 11,751 remained the highest intraday level for Nifty.
Daily strength indicator RSI and the momentum indicator Stochastic both turned negative from the overbought zone, which signalled a price correction ahead.
Rajesh Palviya, Head of Technical Derivatives Analyst, Axis Securities, said: The daily price action has formed a sizable bearish candle and closed below the support zone of last five sessions, indicating a negative bias.
With the current close, the index has broken down the up-sloping channel of last two months at 11,630 on a closing basis, indicating a possible downturn in short-term trend.If Nifty remains below 11,580 level, then this downward momentum will continue towards 11,520 and 11,500 levels.
On the upside, the 11,640 and 11,670 levels remain immediate intraday resistance, Palviya added.As per the Dow Theory, the index has formed a lower top-lower bottom on the daily chart, which suggests that the short-term trend has turned in favour of the bears.
In terms of the wave structure, the last leg of an impulse structure on the upside seems over at Mondays high with a truncation.
The short-term momentum indicator has triggered a bearish crossover.
Thus, the index looks poised for a dip towards 11,300 level, said Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas.