Trade Setup for Monday: Top 15 things to know before Opening Bell

Source: moneycontrol.com

The market is caught in a bear trap and fell to a nearly two-month low in the week ended July 12, dragged by selling across sectors except healthcare, which gained 1.6 percent.

The BSE Sensex was down 777.16 points or 1.97 percent at 38,736.23, while the Nifty50 fell 263.45 points or 2.23 percent to close below psychological 11,600 levels at 11,547.70, forming a bearish candle on the weekly charts.

For July 12, the index lost a third of a percent and formed a bearish candle, which resembles the Bearish Engulfing Pattern on the daily charts.

A Bearish Engulfing Pattern consists of two candles. One candle is usually a small candle, which is followed by a large black or red candlestick pattern that engulfs the short one or the previous candle.

“Nifty has formed a Bearish Engulfing Candle on the daily chart. A higher time frame i.e. the weekly chart, shows that the week was dominated by the bears resulting in a breach of 20-week moving average, which is a crucial medium-term moving average. So the crux of the argument is that the bears are occupying a dominant position and are expected to drive the Nifty down going ahead,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas told Moneycontrol.

He said on the downside, 11,500 and 11,461, will be the initial levels to watch out for with potential to head further down.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities also said a negative candle formed on July 11 on the daily chart with a long upper shadow indicates a lack of strength in the market to sustain above the hurdle of around 11,625-11,650 levels (resistance as per the concept of change in polarity).

Hence the short term trend of the Nifty is weak, with the next lower levels to be watched are around 11,425 in the next few sessions, he added.

The broader markets also traded in line with benchmarks as the BSE Smallcap index fell 2.58 percent and Midcap index was down 1.17 percent.

Key support and resistance level for Nifty

The Nifty closed at 11,552.50 on July 12. According to the pivot charts, the key support level is placed at 11,514.23, followed by 11,475.97. If the index starts moving upward, the key resistance levels to watch out are 11,615.13 and 11,677.77.

Nifty Bank

The Nifty bank closed at 30,601.45, down 115.10 points on July 12. The important pivot level, which will act as crucial support for the index, is placed at 30,476.17, followed by 30,350.93. On the upside, key resistance levels are placed at 30,798.77, followed by 30,996.13.

Call options data

Maximum Call open interest (OI) of 32.09 lakh contracts was seen at the 12,000 strike price. It will act as a crucial resistance level for the July series.

This is followed by 11,800 strike price, which now holds 16.98 lakh contracts in open interest, and 11,700, which has accumulated 16.97 lakh contracts in open interest.

Significant Call writing was seen at the 11,700 strike price, which added 2.82 lakh contracts, followed by an 11,600 strike price, which added 2.35 lakh contracts.

Call unwinding was seen at 12,200 strike, which shed 1.87 lakh contracts, followed by 11,900 strike, which shed 1.21 lakh contracts and 12,100 strike, which shed 0.65 lakh contracts.