Technical View: Bears could gain more strength if Nifty decisively breaks 25,200 support

Nifty Outlook for July 3

The Nifty 50 continued its consolidation movement and closed 0.35 percent lower on profit booking on July 2. The index lost more than 200 points from its recent swing high. As long as it trades below 25,700 (which is near the recent swing high), the consolidation is expected to continue, with the 25,300–25,200 zone acting as a support, according to experts. A decisive close below this support zone could bring the index down to the 25,000–24,800 levels. However, a move above 25,700 may open the path for an upward journey toward the 26,000 level.

The Nifty 50 opened higher at 25,588 and climbed up to 25,608 but could not sustain those gains for long. The index slipped into the red in the morning session itself and remained under pressure thereafter. It finished at 25,453, down 88 points, and formed a bearish candle with a minor lower shadow on the daily charts.

Technically, this market action indicates a downward correction from near the hurdle of the previous opening down-gap around the 25,700 level.

“Nifty is now sliding down to the important cluster support of around 25,300–25,200 levels (support of the ascending trendline on the daily chart and the support as per change in polarity on the weekly chart),” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

However, he believes there is a higher possibility of a sharp bounce emerging from near the mentioned lower support area in the next 1–2 sessions.

According to the weekly options data, the Nifty is expected to remain in the range of 25,000–25,600 in the short term. The maximum Call open interest was observed at the 26,000 strike, followed by the 25,600 and 25,500 strikes, with the maximum Call writing at the 25,500 strike, followed by the 25,450 and 25,600 strikes. On the Put side, the 25,000 strike holds the maximum open interest, followed by the 25,400 and 25,500 strikes, with the maximum Put writing at the 25,000 strike, followed by the 25,350 and 25,450 strikes.

Bank Nifty

The Bank Nifty saw more selling pressure compared to the Nifty 50, falling 460 points (0.8 percent) to 56,999, and forming a long bearish candle on the daily timeframe, indicating increased selling pressure.

Notably, the daily RSI has slipped below the 60 mark and continues to trend downward, signaling weakening momentum in the near term.

Going ahead, "the 10-day EMA zone of 56,850–56,800 will act as immediate support for the index. Any sustainable move below the level of 56,800 will lead to further correction up to the 56,400 level," said Sudeep Shah, Head – Technical Research and Derivatives at SBI Securities.

However, on the upside, the 57,200–57,300 zone will be the crucial hurdle for the index. "Any sustainable move above the level of 57,300 will lead to a resumption of its northward journey," he added.

Meanwhile, the India VIX, the volatility index, remained in the lower zone, keeping the bulls in a comfort zone. The VIX dropped by 0.66 percent to the 12.44 zone.