July series F&O expiry likely to keep market participants on tenterhooks!

What started as a wreckful Wednesday, later, turned out to be a turnaround day as Nifty recovered almost 200 points from the day’s low while the index managed to keep its head above the 15,700 mark. Among the sectoral indices, barring Nifty Metal and Nifty IT, all other indices ended in red wherein, Nifty PSU Bank emerged as the top loser as it plunged 1.88 per cent. Meanwhile, the broader markets ended the day with a cut of half a per cent.   

The price action of the day formed a hammer-like candlestick pattern, which contains a long lower shadow, indicating buying interest at lower levels. Even though the index had formed a hammer-like candlestick, yet the structure of lower high & lower low continues.   

Interestingly, the index has declined below 15,630 for the fourth time in the last one month or so. At one point in time, the index has also breached its 50-DMA for the first time in the near future. However, recovery in the second half of the trading session helped the indices to defend the level of 15,635 and also, the 50-DMA on a closing basis. There is one more interesting observation i.e. the price action of Wednesday resembles the price action that was seen on June 18. The only difference is at that point, the index had breached 20-DMA, which was later reclaimed during the latter half of the session while in the current case, instead of 20-DMA, it’s 50-DMA.   

Despite witnessing a recovery of almost 200 points from the day's low and 255 points' intraday move, the market structure remains similar as the index continued to trade in the band. This consolidation is already 30 days old. We can assume that the consolidation is at a mature stage. The lower end of the consolidation is exactly at 50-DMA at 15,664. The parallel support is at a level of 15,632. Nifty broke this crucial support level four times on an intraday basis, but it has managed to defend it on a closing basis. Going forward, a close below this level will be the first sign of the market making an intermediate top.

As July expiry is in place, expect a volatile move wherein, the level of 15,635 is likely to act as important support while on the upside, the level of 15,800 may act as a resistance level.