Mazhar Mohammad advised traders to remain and avoid buying the dip unless a breakout is registered.
The Nifty50 traded higher in the morning session and moved close to its record high of 12,041. However, all the gains were wiped out after Modi 2.0 cabinet was announced and remained in bears' control in the second half to close in the red on May 31.
Weak global cues amid US-China trade tensions also dented the market sentiment.
The index formed a bearish candle with long lower shadow on the daily scale while small bullish candle on the weekly scale. During the week, the index gained 0.66 percent.
In the last five trading sessions, the market has been consolidating between 11,800 to 12,041 levels and requires a decisive breakout on the higher side to extend its gains towards a new all-time high, experts said, adding if it fails to hold 11,900 levels on a closing basis, then further selling pressure could be possible.
The Nifty50 opened at 11,999.80 and hit an intraday high of 12,039.25, but sudden selling pressure in late morning deals, especially after cabinet portfolio allocation, dragged the index to the day's low of 11,829.45. The index recovered some losses amid volatility in the second half of trade and closed 23.10 points lower at 11,922.80.
Nifty opened positive but failed to surpass its current all-time high of 12,041 and remained highly volatile throughout the session. During the day, it fell down sharply towards 11,830 levels but managed to recover and around 20 points lower.
"In line with expectations, the level of 12,041 proved to be a critical hurdle for bulls as the market witnessed a sell-off from the said resistance point before signing off the week with a bearish candle," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
Weekly charts also maintained a narrow trading range of 227 points with a slightly longer upper shadow dominating the weekly candle body which is a cause for concern, he added.
Hence, in the next trading session if Nifty fails to sustain above 11,900 levels on a closing basis, then it can induce significant weakness going forward, which will be confirmed with breach of 11,829. To prevent this kind of weakness, bulls have no other options than registering a breakout above 12,041 levels, he said.
For the time being, he advised traders to remain and avoid buying the dip unless a breakout is registered.
On the options front, maximum Put open interest (OI) is at 11,500 followed by 11,000 strike while maximum Call OI is at 12,500 followed by 12,000 strike. Put writing is at 11,500 and 11,700 strike while Call writing is at 12,200 and 12,400 strike.
Options data suggests a wider trading range in between 11,550 to 12,250 zones, experts said.
"Now Nifty index has to hold 11,850 zones to witness an upmove towards 12,000 then 12,041 zones while supports are seen at 11,850 then 11,761 levels," said Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
India VIX moved up by 2.93 percent to 16.06 level.
Bank Nifty opened positive and made a new all-time high of 31,783, but failed to hold its gains and drifted sharply towards 30,600 zones. However, it recovered well from lower levels and managed to close above 31,350 zones at 31,375.40, down 161.70 points.
"The index formed a bearish candle with long lower shadow on the daily scale while 'Long Legged Candle' on the weekly scale which suggests a state of confusion at higher band," Chandan Taparia said.
Now Bank Nifty has to hold near to 31,150 zones to witness an upmove towards 31,783 then 32,000 levels while major support exists at 31,000 then 30,500 zones, he added.
