Technical View: Bears gain edge if Nifty 50 falls below 25,800; Bank Nifty drops below 20-DEMA despite VIX at 10-week lows

Nifty outlook for December 17

The Nifty 50 failed to show a sustainable upside recovery from the lows seen in the previous session and closed more than six-tenths of a percent lower with above-average volumes on December 16, despite the VIX reaching a 10-week low. The index continued to form a lower high–lower low structure, indicating that it appears to have formed a new lower top at 26,057. Further, it slipped below short-term moving averages (20- and 50-day EMAs) as well as the midline of the Bollinger Bands, accompanied by negative momentum indicators.

Immediate support is placed at 25,800, which coincides with Tuesday’s low and the 50 percent Fibonacci retracement (of the November low to December high). A decisive fall below this level could open the door for 25,750–25,700, a crucial support zone. On the higher side, 26,050–26,100 is expected to act as immediate resistance, experts said.

The Nifty 50 opened lower at 25,951 and remained under pressure throughout the session amid range-bound trading. It hit an intraday low of 25,834 before closing 167 points, or 0.64 percent, lower at 25,860, forming a bearish candle on the daily timeframe. This signalled the inability of bulls to surpass the key hurdle at the 26,000 level.

Further, the RSI dropped below the 50 level to 47.82, while the MACD maintained a bearish crossover with weakness in the histogram, indicating nervousness in the market.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the underlying trend of the Nifty remains choppy with a weak bias.

“The market is expected to slide towards its next support band of 25,800–25,700 levels in the short term. Any bounce back from here could face a strong hurdle around the 26,000 level,” he said.

Weekly options data suggested that the Nifty may see resistance in the 26,000–26,100 zone, with support at 25,700.

The maximum Call open interest was seen at the 26,000 strike, followed by the 26,500 and 26,100 strikes. The maximum Call writing was observed at the 26,000, 25,900, and 26,300 strikes. Meanwhile, the 25,500 strike held the maximum Put open interest, followed by the 25,900 and 26,000 strikes, with the maximum Put writing at the 25,900, 25,500, and 25,700 strikes.

The Bank Nifty wiped out the previous day’s gains and snapped a three-day winning streak to close below short-term moving averages and the midline of the Bollinger Bands, signalling a loss of near-term momentum. The index declined 427 points, or 0.72 percent, to close at 59,035 and formed a bearish candle on the daily charts, indicating weakness.

More importantly, the daily RSI faced stiff resistance near the 60 mark, indicating that the momentum range is shifting from bullish to sideways, as per RSI range-shift principles. This suggests that buying strength is weakening, and the index may now enter a consolidation phase unless it reclaims key resistance zones with strong follow-through, said Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities.

Going ahead, according to him, the 58,700–58,600 zone will act as an important support for the banking index, as the prior swing low is placed in that region.

“Any sustainable move below 58,600 could lead to further correction towards the 58,000 level in the short term, while on the upside, the 59,300–59,400 zone will act as an important hurdle for the index,” he said.

Meanwhile, India VIX, which measures expected market volatility, dropped to a 10-week low, closing 1.83 percent lower at 10.06. This is generally favourable for bulls and signals a low-uncertainty environment. However, being at such low levels also increases the possibility of sharp market moves on either side.