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This article is more than 2 month old.

Trade Setup for Aug 26: Will Nifty50 retreat further? Check key market cues before Thursday’s session

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Is the Nifty50 index bracing for a bigger dip before further upside? Here's how the August 26 session is poised to start.

Trade Setup for Aug 26: Will Nifty50 retreat further? Check key market cues before Thursday’s session
Indian equity benchmarks soared to all-time highs on Wednesday before retreating to end almost unchanged as selling pressure emerged in select heavyweight financial stocks. The NSE Nifty50 index eked out a gain of 10.05 points to end at a record 16,634.65, though 77.8 points off a lifetime high clocked during the session.
So, what do the charts suggest for Dalal Street?
The index formed a candle that resembles a shooting star, which has a bearish implication, according to Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas. The overall structure shows that Nifty50 is still in a short-term consolidation phase, and likely to witness a dip before further upside, he said.
Broader markets in focus
"Currently, the midcap and smallcap segments are in a negative trend, and an area forming lower highs and lower lows. Hence, any decline in these segments after the formation of new lower highs could pull the market into downward correction," said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.
Here are key things to know about the market before Thursday's session:
SGX Nifty
Nifty futures trading on Singapore Exchange -- an early indicator of India's NSE Nifty50 benchmark -- were down 27.5 points or 0.16 percent at 16,653 at 8:17 am on Thursday, signalling a weak start ahead on Dalal Street.
Global markets
Equities in other Asian markets stepped back following this week's sharp rebound, though a gains on Wall Street overnight contained kept the losses in check.The South Korean central bank raised its base rate by 25 basis points to 0.75 percent -- the first major economy in Asia to do so, after Sri Lanka hiked its base rate last week. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.22 percent. On Wednesday, the key US indices edged higher, with the S&P 500 gauge logging its 51st record closing high of 2021. 
What to expect on Dalal Street
"Nifty's short-term trend continues to be positive. But the pattern formation and the emergence of minor selling from the new all-time highs signal chances of consolidation or some more profit booking in the short term," said HDFC Securities' Shetti.
Does that mean the latest dip can stretch to at least the early hours of Thursday? 
Financial stocks have been found quite reluctant to support, said Anand James, Chief Market Strategist at Geojit Financial Services. "However, midcap and smallcap stocks appear to have found their voice, suggesting that the overall sentiment may not turn outrightly negative, and the bulls could attempt a regroup once inside the 16,585-16,520 region for a dash towards 17,000-17,200," he said.
To Rahul Sharma, Co-Founder of Equity99, the market looks strong ahead with midcap and smallcap stocks recovering following a selloff, along with the IT and metals indices. IT, banking, infrastructure, automobile and logistics stocks will be in focus on Thursday, he said.
Key levels to watch out for
Nifty50: The index as immediate and strong support at 16,600, and then 16,550-16,475 levels, and faces resistance at 16,700, followed by 16,740-16,800, according to Equity99's Sharma.
Nifty Bank: The banking index finds support at 35,500-35,380-35,200 levels, and resistance for it comes in at the 35,900-36,200 zone, he said.
FII/DII activity
Foreign institutional investors withdrew a net Rs 1,071.83 crore from the Indian capital market on Wednesday. Domestic institutional investors pulled out Rs 151.39 crore, exchange data showed.
Call/put open interest
The maximum call open interest is accumulated at the strike price of 16,700, followed by 16,800. On the other hand, there is a high degree of put open interest at the strikes of 16,600 and 16,500, NSE data shows. This indicates that immediate resistance can be expected at 16,700, and then 16,800, and support comes in at 16,600.
Long build-up
Here are five stocks that saw an increase in open interest as well as price, suggesting a build-up of long positions:
SymbolCurrent OICMPPrice change (%)OI change (%)
PIDILITIND9,99,0002,207.100.04%22.32%
HINDALCO1,85,69,550431.12.39%20.88%
NESTLEIND1,23,60019,901.900.78%19.58%
TORNTPHARM2,43,5003,069.350.44%18.17%
INDIGO7,83,5001,7161.55%17.29%
Long unwinding
SymbolCurrent OICMPPrice change (%)OI change (%)
NAVINFLUOR2,27,9253,605.20-1.27%-30.11%
AUBANK8,27,5001,351.70-0.63%-24.59%
LALPATHLAB1,95,2503,822.15-0.35%-23.18%
AARTIIND13,06,450914.35-0.64%-23.10%
BAJAJFINSV3,54,82516,018.05-2.57%-22.85%
(Decrease in open interest and price)
Short-covering
SymbolCurrent OICMPPrice change (%)OI change (%)
METROPOLIS1,85,2002,6910.10%-27.65%
COALINDIA1,97,82,000138.851.76%-21.30%
TATAMOTORS4,24,93,500284.81.59%-17.61%
APLLTD10,39,5007501.34%-16.35%
IOC2,12,35,500106.050.09%-16.04%
(Decrease in open interest and increase in price)
Short build-up
SymbolCurrent OICMPPrice change (%)OI change (%)
ASIANPAINT15,84,0003,038.25-0.42%40.02%
MARUTI10,92,3006,716.55-1.35%32.12%
ALKEM2,08,2003,831.30-0.05%23.15%
MFSL12,31,7501,023.30-1.98%22.96%
HAVELLS13,46,5001,207.05-4.56%20.98%
(Increase in open interest and decrease in price)
Stocks hitting 52-week highs
Bajaj Finance, Bajaj Finserv, TCS, Tech Mahindra, Wipro, Tata Elxsi, Nestle, Naukri, Coforde Linde, HAL and DMart were among the stocks that clocked 52-week highs.
Stocks hitting 52-week lows
Only one stock in the BSE 500 universe -- the broadest index on the bourse -- hit a 52-week low: Amara Raja Batteries. Besides, CarTrade Tech and Nxtdigital also hit 52-week lows.
Volatility gauge
The India VIX index -- which measures the expectation of volatility in the market -- jumped 2.35 percent to 13.50, having bounced as much as 5.91 percent at one point during Wednesday's bumpy session.
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