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Trade setup for July 6: More pain on the cards for the bulls after Nifty fails to cross a key hurdle

Trade setup for July 6: More pain on the cards for the bulls after Nifty fails to cross a key hurdle

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By Sandeep Singh   IST (Updated)

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Trade setup for Wednesday, July 6: The Nifty50 may be in for lower levels after failing to take out a key hurdle at 15,850-15,950 levels, say experts. Here's what the technical charts suggest:

Indian equity benchmarks gave up intraday gains of more than one percent in the last hour of trade on Monday, dragged by a sharp reversal in financial and IT shares. Aggressive hikes in pandemic-era interest rates and their impact on economic growth kept investors nervous.
What do the charts suggest for Dalal Street now?
The Nifty50 has formed a reasonable negative candle on the daily chart with a long upper shadow, confirming crucial resistance in the 15,850-15,950 zone, according to Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
"One may expect further weakness in the short term as such false breakouts in the past have resulted in minor downward corrections amid rangebound moves," he said. 
More of sideways action likely
Independent technical analyst Manish Shah is of the view the index is showing signs of rangebound action between 15,600 and 16,050.
"It needs to break above 16,050 for a rally to 16,300 and beyond... A drop to support at 15,600-15,580 levels could be a buying opportunity," he said.
Here are key things to know about the market ahead of the July 6 session:
SGX Nifty
Singapore Exchange (SGX) Nifty futures — an early indicator of the Nifty index — rose as much as 109.5 points or 0.7 percent to 15,875.5 ahead of the opening on Dalal Street.
Global markets
Equities in other Asian markets began Wednesday in the red following a mixed session on Wall Street. MSCI's broadest index of Asia Pacific shares outside Japan was down 0.4 percent in early hours.
Japan's Nikkei 225 was down 1.2 percent, and China's Shanghai Composite and Hong Kong's Hang Seng were down 0.6 percent each.
S&P 500 futures edged lower, suggesting a muted start ahead on Wall Street. On Tuesday, the S&P 500 rose 0.2 percent and the tech stocks-heavy Nasdaq Composite 1.8 percent, but the Dow Jones dropped 0.4 percent.
What to expect on Dalal Street
HDFC Securities' Shetti believes the short-trend of the 50-scrip benchmark has reversed to be weak.
The Nifty50 may return to the 15,600-15,500 levels in the near term.
Important levels to track
The Nifty50 and the Nifty Bank are about eight percent below their long-term simple moving averages in a bearish sign.
Period (No. of sessions)Simple moving average
Nifty50Nifty Bank
515,795.5
33,598.3
1015,732.933,505.3
2015,760.333,543.1
5016,164.134,370.7
10016,643.535,409.2
20017,14436,568.9
Shah expects the banking index to extend a fall below 33,700 all the way to 33,100.
"The Nifty Bank is in a range between 33,400 and 33,100. It needs to move above 33,400-33,450 levels for a rally to 35,900-36,000 levels," he said.
He believes it will continue to oscillate between a broad range of 33,100-34,000 for a prolonged period.
FII/DII activity
Call/put open interest
The maximum call open interest is accumulated at the strike price of 16,000, with 1.8 lakh contracts, and the next highest at 16,200, with 1.5 lakh contracts, according to exchange data. The maximum put open interest is at 15,500, with 1.1 lakh contracts, and 15,700, with almost one lakh.
This suggests immediate resistance at the 16,000 mark and immediate support at 15,700.
Long build-up
Here are five stocks that saw an increase in open interest as well as price:
StockCurrent OICMPPrice change (%)OI change (%)
CROMPTON3,796,500354.51.63%16.00%
SRTRANSFIN3,339,0001,242.800.78%11.46%
ONGC71,421,350126.650.32%10.66%
UBL956,8001,577.151.61%10.54%
CIPLA7,598,500940.20.70%7.98%
Long unwinding
StockCurrent OICMPPrice change (%)OI change (%)
GUJGASLTD3,581,250431-1.17%-5.27%
MFSL1,498,250808.8-0.23%-1.74%
JKCEMENT395,2502,177.80-1.08%-1.71%
ITC90,076,800286.6-1.53%-1.69%
OBEROIRLTY5,087,600764.4-0.42%-1.54%
(Decrease in open interest as well as price)
Short covering
StockCurrent OICMPPrice change (%)OI change (%)
ALKEM230,6003,049.850.05%-2.52%
MCX3,254,0001,3061.19%-2.35%
RELIANCE36,193,5002,429.350.38%-1.50%
COALINDIA31,365,600182.550.08%-1.43%
TORNTPOWER3,231,0004680.85%-1.02%
(Increase in price and decrease in open interest)
Short build-up
StockCurrent OICMPPrice change (%)OI change (%)
SRF3,409,8752,046.50-6.58%19.22%
RBLBANK42,400,00081.6-7.01%10.98%
SYNGENE818,000549-1.77%10.51%
DIXON557,2503,508.05-2.47%9.49%
ICICIPRULI6,103,500499-2.54%8.23%
(Decrease in price and increase in open interest)
52-week highs
Five stocks on the BSE 500 — the broadest index on the bourse — touched the milestone: ITC, Chalet Hotels, Siemens, Mahindra Lifespace and Varun Beverages.
52-week lows
Four stocks on the 500-scrip index hit 52-week lows: Indiabulls Housing Finance, Wockhardt, Thyrocare and IndiaMART.