Technical View: Chart pattern suggests consolidation in Nifty, more selling pressure seen if index break 25,400

Nifty Outlook

The Nifty 50 snapped a four-day winning streak and closed half a percent lower on June 30. This consolidation was on expected lines given the significant rally in the past week. However, the trend remains in favour of the bulls as long as the index holds the crucial support of 25,200, which is the upper range of the previous long consolidation. The immediate support is placed at 25,500–25,400, while on the higher side, 25,800 is the level to watch. If the index remains below this level, consolidation and range-bound trading may continue, according to experts.

The Nifty 50 could not hold on to opening gains as it immediately came under profit booking pressure and remained weak for most of the session. The index lost 152 points from the day's high and finished at 25,517, down 121 points, forming a Bearish Engulfing pattern on the daily charts at the top — a pattern that suggests the next session will be crucial for further direction.

“The formation of a Bearish Engulfing pattern is indicating fatigue in the ongoing market rally. In the near term, the index may enter a phase of consolidation,” said Rupak De, Senior Technical Analyst at LKP Securities.

According to him, the short-term trend is likely to remain sideways before any decisive directional move.

“On the downside, a decisive fall below 25,500 could trigger a correction. On the upside, resistance is placed at 25,600 and 25,800,” he added.

The weekly options data suggests that 25,500 is expected to be the key zone for further direction in the Nifty 50. The short-term trading range may lie between 25,200–25,700.

The maximum Call open interest was seen at the 26,000 strike, followed by 25,600 and 25,700 strikes. The maximum Call writing was observed at the 25,600 strike, followed by 25,700 and 25,800 strikes. On the Put side, the 25,500 strike holds the maximum open interest, followed by 25,000 and 25,200 strikes, with the maximum Put writing at the 24,900 strike, followed by 25,200 and 24,800 strikes.

Bank Nifty

The Bank Nifty also saw profit-taking, declining 131 points to close at 57,313, and formed a bearish candle on the daily charts. However, it continued its higher highs–higher lows formation for the third consecutive session.

The higher lows formation has been intact for the past seven sessions, indicating buying interest at lower levels.

“Now it has to hold above 57,250 zone for an up move towards 57,615, and then into new life high territory towards 58,000 levels. On the downside, support is seen at 57,000, then 56,750 zones,” said Chandan Taparia, Head – Technical Research and Derivatives at Motilal Oswal Financial Services.

The India VIX, the fear index, rebounded after a four-day decline but remains well below the 15 mark, which is favourable for bulls. It closed at 12.79, up 3.21 percent.

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