Technical View: Bears dominate for third session; August swing low at risk if rising trendline breaks; stay with sell-on-rally strategy

Nifty outlook for September 1

The Nifty 50 extended its southward journey for the third consecutive session as bears maintained their dominance on August 29, marking a negative start to the September series. Market participants seem worried about growth amid tariff hikes. The index continued its lower highs–lower lows structure and sustained well below the 20-, 50-, and 100-day EMAs with above-average volumes. Furthermore, the short-term and medium-term moving averages trended down, signalling weakness.

The index managed to defend the upward-sloping support trendline on a closing basis and formed a bearish candle with a long upper shadow, indicating pressure at higher levels and a sell-on-rally market. This pattern also resembles an Inverted Hammer on the daily charts, which is generally considered a bullish reversal pattern, but confirmation will be needed in the following session.

If the index decisively breaks the support trendline, bears are likely to focus on the August low of 24,340 and the 200-day EMA (24,270). However, if it holds above, the 24,600–24,700 zone will be the resistance levels to watch, according to experts.

The Nifty 50 attempted a rebound and hit an intraday high of 24,572, but could not sustain the recovery. The index lost all those gains and ended the session at 24,427, down 74 points. Momentum indicators also trended down, with the RSI falling further to 39.14, while the MACD gave a bearish crossover, and the histogram dropped below the zero line.

The index shed 1.78 percent for the week and formed a long bearish candle on the weekly timeframe, confirming the Shooting Star pattern seen in the previous week (a bearish reversal pattern), thereby wiping out all of the previous week's gains. It dropped 1.4 percent for the month of August.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, more weakness may be expected in the coming week.

"Nifty is nearing a crucial lower support around 24,300–24,200 levels (previous swing low and 200-day EMA), but sustainability above the said supports could be doubtful. Hence, a decisive move below 24,200 could lead the Nifty down to the next lows of around 24,000–23,900 levels in the near term," he said.

However, he believes that a strong upside momentum above the 24,700 hurdle could change the sentiment in favour of bulls.

The weekly options data also suggested that 24,400 is expected to be the immediate support for the Nifty 50, with 24,300 as the next level to watch, and immediate resistance located in the 24,500–24,600 zone.

The maximum Call open interest was observed at the 25,000 strike, followed by the 24,600 and 24,500 strikes. The maximum Call writing was at the 24,500 strike, followed by 24,600 and 25,000 strikes.

On the Put side, the 24,400 strike holds the maximum open interest, followed by the 24,000 and 24,500 strikes. The maximum Put writing was at the 24,400 strike, followed by 24,450 and 24,300 strikes.

Bank Nifty

The Bank Nifty corrected throughout the week, falling 165 points on Friday to close at 53,656, forming a Gravestone Doji-like pattern on the daily timeframe. This pattern typically indicates a trend reversal, though confirmation is required in the following session. The index nearly touched its 200-day EMA (53,570), testing an intraday low of 53,606.

Momentum indicators continue to signal weakness. The RSI remains in bearish territory and continues to trend lower, while the daily MACD remains negative, staying below both its zero line and signal line.

The index lost 2.71 percent during the week, sharply underperforming the Nifty 50. It formed a long bearish candle on the weekly charts and traded well below the 10- and 20-week EMAs. For the month, it was down 4.12 percent, adding to the 2.4 percent loss in the previous month, especially after hitting a record high.

According to Sudeep Shah, Head – Technical Research and Derivatives at SBI Securities, looking ahead, the 53,500–53,400 zone will act as crucial support. A sustained move below 53,400 could trigger a sharper decline towards 52,900, followed by 52,500 in the short term.

On the upside, he added that the 54,400–54,500 zone will serve as key resistance.

Meanwhile, the India VIX, the fear index, dropped below short-term moving averages and closed at 11.75, down 3.49 percent on the day, but up 0.21 percent for the week. Lower volatility typically indicates market stability, though sharp moves in either direction cannot be ruled out.