Directional move expected on indices

Nifty forms a bearish engulfing pattern on a daily scale covering the entire 4 days of price action indicating a strong caution on the higher levels of 18,350. A bearish engulfing is a candlestick reversal pattern that indicates a reversal in an uptrend.

The reliability of this pattern improves when it is formed after a sustained uptrend, at a previous resistance level with higher volume and volatility. It is now very important to watch tomorrow's price action as the Index is able to sustain supports or further selling pressure takes benchmark to test lower levels. On the downside, support is placed at 18,090 and if that is breached and we see sustained selling pressure then we can test lower levels of 17,950 – 17,900. On the higher side, 18,250 – 18,280 now is an important resistance.

BankNifty also shredded its day's entire gain of more than a per cent to close lower with marginal loss. BankNifty point of support is 38,050 and below that, we may see lower levels of 37,550.

The volatility in today's price action was fuelled by the press conference which was scheduled later and hence Fear was evident. From here a directional move is expected in both the indices as per bar patterns analysis rolling back to the last 22 days. During high volatility, we suggest keeping important supports and resistance in check and trade with tight levels for risk management.

(The author is technical analyst at Finversify)