Technical View: Bears may tighten their grip if Nifty decisively breaks June low

Nifty Outlook for August 7

Bears maintained control over the market following the hawkish pause by the RBI in its policy meeting on August 6, pushing the benchmark Nifty 50 close to the previous week's low of 24,535. The index failed to defend the 100-day EMA in today’s session. Further selling pressure seems likely in the upcoming sessions, considering the continuation of the lower highs-lower lows structure, the 20-day EMA on the verge of falling below the 50-day EMA, and the negative crossover in the RSI, which has remained below the 40 level.

According to experts, if the Nifty 50 breaks and sustains below the June low of 24,473, the next target for the bears would be a major sell-off toward the 24,200 level (200-day EMA). However, on the upside, the index may face resistance at the 24,750-24,800 zone.

The Nifty 50, after opening flat, remained rangebound on the lower side and closed at 24,574, down 75 points. This formed a bearish candle on the daily charts, indicating a narrow range movement in Nifty over the last few sessions near the crucial support level of 24,500.

This is not a positive sign and suggests that the support at 24,500 could eventually be broken decisively on the downside in the near term, according to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

He further noted that the underlying trend of Nifty continues to be weak amidst choppy movement. "A sharp breakdown of the support at 24,500 could trigger a quick decline toward the next support level of 24,200 (200-day EMA). Immediate resistance is placed at 24,800," he added.

The weekly options data suggests that the Nifty 50 is likely to trade in the 24,400-24,700 range in the near term.

On the Call side, the maximum Call writing was observed at the 25,000 strike, followed by the 24,700 and 24,600 strikes, with the highest writing at the 24,600 strike, and then at the 25,000 and 24,700 strikes.

On the Put side, the 24,000 strike holds the maximum Put open interest, followed by the 24,600 and 24,500 strikes, with the highest writing at the 24,550 strike, and then at the 24,000 and 24,400 strikes.

Bank Nifty

The Bank Nifty defended its previous day's low and traded within the previous day's range, closing 51 points higher at 55,411. It outperformed the benchmark Nifty 50 after the RBI unanimously decided to keep the repo rate unchanged while holding a neutral stance. The index formed a small green candle with upper and lower shadows on the daily charts, indicating signs of indecision between the bulls and bears.

Technically, the index is currently trading below its 20-day and 50-day EMAs, both of which are in a declining trajectory — a sign of short-term weakness. On the momentum front, the RSI on the daily chart is in the bearish zone and continues to trend downward, suggesting weakening price strength and a lack of buying interest.

"Going forward, the 100-day EMA zone at 55,000-54,900 will act as immediate support for the index. Any sustainable move below the level of 54,900 will lead to further correction down to the 54,400 level," said Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities.

On the upside, the 55,800-55,900 zone will act as a crucial resistance for the index, he added.

Meanwhile, the India VIX, the fear gauge, fell sharply during the day but returned to positive territory, closing at 11.96, up by 2.11 percent. The index was above its short-term moving averages, signaling some caution for the bulls.