Markets near end of downward journey, charts suggest reversal on cards next week post budget

Nifty Outlook

As we approach the close of January 2025, traders are undoubtedly feeling the weight of a tough month. The stock market has faced a consistent downward slide, leaving many wondering if there is any hope left. With every tick downward, the optimism in the air begins to dissipate, leaving behind a mixture of frustration and uncertainty. Yet, despite the current gloom, there is a glimmer of hope on the horizon.

The current week (starting from January 27) promises volatility, but it may also mark the start of a turning point for the markets. We are heading into two critical events this week - Thursday's Futures & Options expiry week and the Union Budget announcement on Saturday.

Note—the markets will remain open on Saturday, which means heightened focus on the budget’s implications. With all eyes on these pivotal moments, an emerging narrative suggests that the markets are nearing the end of their downward journey.

What’s more - a reversal could be in the cards for those who are paying attention to the charts.

Nifty50

The Nifty50 index, India’s benchmark stock market index, is approaching a crucial support level.

On the weekly chart, the index is nearing the support of a five-year rising trendline connecting the lows of 2020 and 2023. This support level is around 22,600, representing a vital floor that has held up well over the past five years.

Additionally, there is another layer of support to consider - the 62-week moving average (62WEMA) channel, which has consistently acted as a support zone since the pandemic lows. This channel spans between 22,750 and 23,330, reinforcing the notion that the index has multiple safety nets in this range.

With combined support at 22,600 and 22,750, the index could potentially reverse from its downward trajectory and start heading back up soon.

Considering these technical factors and the current market conditions, it is possible that the first half of the upcoming week could see continued bearish action, leading to a potential reversal or even a bullish sentiment by the week's end. The uncertainty surrounding the Union Budget and Futures & Options expiry week may create short-term volatility, but the medium-term outlook remains cautiously optimistic.

Nifty500

While the Nifty50 index is pivotal, looking at the broader market is also important. The Nifty500, which tracks the performance of 500 stocks across various sectors, is currently trending within its own 62WEMA channel.

The broader market has been more resilient, and the charts are starting to suggest the formation of a probable Bullish Gartley Harmonic pattern. This technical pattern is often viewed as a signal that a price reversal is imminent.

The reversal zone for the Nifty500 is between 20,550 and 20,800, indicating that the broader market could be setting up for a recovery. Moving into this range could usher in a fresh wave of optimism as traders seek opportunities outside the largecap stocks that recent market pressures have weighed down. As volatility continues through the week, the Nifty500 may emerge as an attractive space for potential gains as we move toward the Union Budget announcement.

Nifty Midcap150

Midcap stocks have also been feeling the heat last week, ending the week with a 2.4% loss. However, like the broader market and largecap stocks, midcaps follow a familiar pattern.

The index is currently hovering within the same 62WEMA channel, and the technical indicators suggest that a reversal could be imminent. The presence of a probable Bullish Gartley pattern here also indicates that midcaps could be in line for a potential strong recovery by the end of the upcoming week.

Optimism Amid Volatility: The Path Forward

Despite the ongoing volatility and the bearish sentiment that has dominated much of the month, the technical charts suggest that we are nearing a crucial juncture where the markets could potentially reverse. With key support zones on the Nifty50, Nifty500, and Nifty Midcap 150 charts, there is a good chance that the worst of the selling is behind us.

The current week, marked by the Futures & Options expiry and the Union Budget, will undoubtedly bring volatility. But for traders keeping an eye on the technical signals, it could be a week of opportunity.

Optimism is the way forward, and as history has shown us, the market’s true strength often shines brightest after moments of fear.