The Nifty 50 wiped out all the previous two days' gains and declined by nearly 1 percent, closing below the psychological 26,000 zone on December 8. If the index sustains below 26,000 (which somewhat coincides with the 20-day DMA and the midline of Bollinger bands), the next target for the bears could be 25,892 (Monday's low) followed by 25,840 (the low of November 26). A decisive fall below this level could give the bears a stronger position. On the higher side, 26,100-26,200 is expected to act as a hurdle, according to experts.
The Nifty 50 opened lower and remained under pressure throughout the session, hitting a day's low of 25,892 (which coincides with the previous week's low) before closing at 25,961, up 226 points (0.86 percent) with above-average volumes. The index formed a long bearish candle with a minor lower shadow on the daily charts, indicating weakness, though there was some buying at lower levels.
The momentum indicators also signaled caution, with the RSI declining to 51.16. The MACD remained below the reference line, with the histogram falling below the zero line. However, the Stochastic RSI maintained a bullish crossover near the lower zones, and the index slipped below short-term moving averages (10 and 20-day EMAs) as well as below the midline of Bollinger bands.
"The index has now closed below the 21 EMA for the first time in many days, indicating a weakening trend. Supporting this view, the RSI has once again turned into a bearish crossover," said Rupak De, Senior Technical Analyst at LKP Securities.
Adding to the negative setup, the Nifty registered its lowest closing in nine days, highlighting broader weakness, while India VIX also witnessed a spike.
Hence, according to him, the sentiment looks weak in the short term, with the index potentially sliding towards 25,730. On the higher side, resistance is placed at 26,000–26,100.
The weekly options data suggested that 25,800 is expected to be immediate support, with resistance at 26,000-26,100.
The maximum Call open interest was seen at the 26,200 strike, followed by the 26,100 and 26,000 strikes, with the maximum Call writing at the 26,100, 26,200, and 26,000 strikes. Meanwhile, the 25,900 strike holds the maximum Put open interest, followed by the 25,800 and 25,500 strikes, with the maximum Put writing at the 25,900, 25,750, and 25,700 strikes.
Bank Nifty
The Bank Nifty also traded in line with the benchmark Nifty 50, falling 539 points (0.9 percent) to 59,239 and forming a bearish candle with a minor lower shadow on the daily timeframe but managed to defend the 20 DEMA and midline of Bollinger bands on a closing basis, which is positive.
The momentum indicators signalled minor weakness, with the RSI (56.95) and Stochastic RSI sustaining below the reference line. The MACD maintained a bearish crossover, with weakness in the histogram.
"The zone of 59,000–58,900, which coincides with the previous swing low, is likely to act as an important support zone for the index. Any sustained move below 58,900 could lead to the index breaking its 20-day EMA and moving lower, potentially taking it down to 58,700, followed by 58,500," said Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities.
On the upside, the zone of 59,400-59,500 is likely to act as strong resistance for the index, he added.
Meanwhile, India VIX, also known as the fear gauge, rebounded sharply by 7.85 percent to 11.13 after a significant correction in the previous two weeks, signaling some discomfort among bulls. However, as long as it sustains below the 12-zone, the bulls may not be at major risk.
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