Tech View: Nifty Forms Falling Wedge Pattern – What Should Traders Do Next?
The Indian stock market finally put an end to its eight-day losing streak on Monday, thanks to a strong rebound led by HDFC Bank, along with support from Reliance Industries (RIL) and Bajaj Finance. The 30-share BSE Sensex closed at 75,996.86, gaining 57.65 points (0.08%), while the Nifty 50 index rose 30.25 points (0.13%) to settle at 22,959.50. However, despite the recovery, the overall sentiment remains cautious, as technical indicators suggest that traders should remain alert to potential market movements.
Understanding the Falling Wedge Pattern
Market analysts have pointed out the formation of a Falling Wedge pattern in the Nifty on a shorter timeframe, which could be an early sign of a potential trend reversal. A Falling Wedge typically occurs when price action moves within converging downward-sloping trendlines. This pattern often signals a slowdown in selling pressure and hints at an eventual breakout to the upside.
What Should Traders Do Now?
Experts believe that Nifty’s current support and resistance levels will play a crucial role in shaping market movement in the coming sessions. Here’s what some top analysts have to say:
Rupak De, LKP Securities:
Nifty closed significantly higher from the day’s low, indicating strong buying interest at lower levels.
However, it failed to reclaim key Fibonacci retracement levels and remains below critical moving averages.
The index is likely to remain a “sell-on-rise” candidate unless it closes above 23,150.
On the downside, support is placed at 22,800.
Hrishikesh Yedve, Asit C Mehta Investment Intermediates:
Nifty has formed a bullish belt hold candlestick pattern near multiple support zones, showing strength.
If Nifty holds above 22,725, a buy-on-dips strategy is advisable.
Immediate resistance stands at the 21-Day Simple Moving Average (DSMA) of 23,240.
A decisive move above 23,250 could confirm a near-term trend reversal.
Rajesh Bhosale, Angel One:
The index found strong support around 22,800, hinting at a possible double-bottom formation on the daily chart.
The Falling Wedge pattern, connecting the lows of November and January, suggests a potential recovery.
Key support zones are at 22,800-22,700 and 22,600-22,500.
Positive divergence on the RSI indicates a possible shift towards bullish momentum.
Traders are advised to avoid panic selling and consider accumulating quality stocks on dips.
Key Levels to Watch
Support Levels: 22,800, 22,725, 22,600-22,500
Resistance Levels: 23,150, 23,250 (21-Day SMA), 23,400 (Upper boundary of the Falling Wedge)
Final Thoughts
While the recent rebound offers some relief to traders, Nifty remains at a crucial juncture. The short-term trend will depend on whether the index can break above key resistance levels. Traders should remain cautious, avoid aggressive short positions, and look for buying opportunities on dips.
As always, it is essential to follow disciplined risk management strategies and keep an eye on global market cues before making trading decisions.
Reference from:-https://economictimes.indiatimes.com/markets/stocks/news/tech-view-nifty-forms-falling-wedge-pattern-on-a-shorter-timeframe-what-should-traders-do-on-tuesday/articleshow/118330938.cms?from=mdr