Index trend and stocks in action on July 23, 2020

On Wednesday, Nifty opened the session on a buoyant note. However, the early optimism soon faded away and Nifty started to move lower.

On the way down, Nifty had almost filled the opening gap of July 21 but the 20-hourly MA came to rescue the bulls as the latter took support at 20-hourly MA and recouped some of the losses in the last hour of the trade.

Though Nifty ended the day with a modest loss, the volatility has surged and this is a very common phenomenon after a spread contraction. Wednesday’s spread was about 182 points, which was above a 10-day average of 147 points.

The price action of the day formed a ‘hanging man like pattern’, which is a candlestick pattern that hints at the reversal of an uptrend.  Even though Nifty moved below the prior bar low, it did not close above the prior bar low and this is likely to give some confidence to the bulls as they have not totally lost it and their hopes are still alive.

Going ahead, the level of 11,050 is likely to act as an immediate support level. Any move below this level would open gates for further correction of a minimum 70-100 point. On the way down, the level of 10,863, which is 200-DMA, would act as major support.

On the upside, the level of 11,200-11,235 would continue to act as a resistance level and only a move above this would ignite the bullish bias for the index.

Let’s look at the indicator placement. RSI has turned down from the overbought conditions; the stochastic oscillator is above to give a negative crossover at an extreme overbought condition.

We would advise the traders to be cautious at the current levels and play according to the levels mentioned in the article.

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