Index trend and stocks in action on August 07, 2020
Nifty opened the session with a gap-up and extended its upmove to register a high of 11,256. Thereafter, the index retreated from its higher levels to trade near the day’s low but the rebound in the last hour of the trade helped the indices to close above the 11,200 mark with handsome gains of 0.89 per cent.
The price action for the day formed an indecisive candle that resembles a Doji pattern as its close was very near to the open. Further, the day’s range was confined to 129 points, which is the narrowest range in the past four days, and hence, it resulted in a formation of the NR4 bar. This pattern indicates a contraction in volatility and it is usually followed by a high volatility phase.
Nifty has been making higher lows in the last three trading sessions and even on the lower timeframe chart, there is no lower low formation. With this, the support levels are shifting higher, and currently, the 20-DMA is placed at 11,013. Hence, this is an important support to watch out in the near term. A breach of this support can attract the selling pressure and it may take the index towards 200-DMA. On the upside, the level of 11,225-11,260 is likely to act as a resistance.
As the daily bars are making higher highs and higher lows, it is better to continue the long positions with a trailing stop-loss. The only thing from here onwards the intraday volatility might increase.
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