Technical View: Bearish Belt Hold formation signals caution for Nifty bulls, holding 10-day EMA of 23,900 crucial for upward move

Nifty Technical View

The Nifty 50 snapped two-day gains and fell by eight-tenths of a percent, though it managed to defend the 24,000 level on a closing basis on January 3. The selling pressure was led by banking & financial services, technology, and pharma stocks. If the index fails to defend the 10-day EMA (Exponential Moving Average) or the 200-day SMA (Simple Moving Average) of 23,900, the downward trend may extend to 23,700 (200-day EMA, the crucial support). However, defending the same in the upcoming sessions could open doors for the 24,200-24,400 zone, experts said.

The Nifty 50 opened flat at 24,196 (which was also its intraday high) and remained under pressure throughout the session. The index touched an intraday low of 23,976 in late trade, before closing at 24,005, down 184 points (0.76%) with above-average volumes. It formed a Bearish Belt Hold pattern on the daily charts, a bearish reversal pattern, but confirmation in the following sessions is needed.

The opening downside gap of December 19 was filled at 24,150 in the previous session (Thursday), but the market was not able to sustain above the said gap area in the subsequent session. A reasonable bull candle was formed on the weekly chart with both upper and lower shadows, indicating a high-wave type candle formation. It gained 0.8% for the week.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the near-term uptrend for Nifty remains intact. "A decisive move above Thursday's high (24,226) could open renewed buying participation towards 24,400-24,500 levels. Immediate support is around 23,930-23,840 levels," he said.

As per the derivative data, the maximum Call open interest was seen at the 25,000 strike, followed by the 24,500 and 24,200 strikes, with maximum Call writing at the 24,500 strike, and then the 24,400 and 24,200 strikes. On the Put side, the 23,700 strike holds the maximum open interest, followed by the 24,000 and 23,500 strikes, with maximum Put writing at the 23,700 strike, and then the 24,000 and 23,500 strikes.

The above weekly options data indicates that the Nifty may face resistance at the 24,200-24,500 zone, with key support at the 23,700 zone. Overall, the trading range for the next sessions could be 23,700-24,500.

The Bank Nifty wiped out all its previous day's gains and dipped a tad below 51,000, falling by 617 points (1.2%) to 50,989, forming a long bearish candlestick pattern on the daily timeframe with above-average volumes. The index is now staying below the 10, 20, 50, and 100-day EMAs with a negative crossover in the momentum indicators, indicating weakness. On the weekly charts, there was a High Wave kind of pattern, signaling volatility. The index was down 0.6% during the week.

"The 200-day SMA, or the 50,500-50,600 range, would act as a critical support zone," said Amol Athawale, VP - Technical Research at Kotak Securities.

On the upside, the 50-day and 20-day SMAs, or the 51,800-52,200 range, could be crucial resistance areas for the bulls, he added.

Meanwhile, the India VIX remained supportive for bulls, falling 1.44% to 13.54, extending the downtrend for another session.