Technical View: Consolidation may continue until Nifty closes decisively above 23,350; Bank Nifty fails to defend 49,000

Nifty Downtrend

The Nifty 50 remained in a consolidative phase, reversing some of its previous three-day gains as bears continue to maintain strong control over Dalal Street. The index is trading well below all key moving averages, with a negative bias in the momentum indicators. The index closed half a percent down on January 17, due to sharp selling pressure in the banking & financial services and technology stocks. The short-term moving averages falling below the long-term moving averages added further negativity.

Hence, until the index gives a decisive close above 23,350 (which can fill the down gap of January 13) and sustains above it, the consolidation may continue in the upcoming sessions, with immediate support at 23,100 (Friday’s low). Above 23,350, 23,450 (50-week EMA) is expected to be the initial resistance, followed by 23,600 (20-day EMA), according to experts.

The Nifty 50 opened lower at 23,277 and remained under pressure throughout the session, closing 109 points down at 23,203. The index formed a bearish candlestick pattern with a lower shadow on the daily charts, indicating buying interest at lower levels as well as a lack of strength in the recent upside bounce.

The previous opening downside gap of January 13 has acted as a strong hurdle for now. For the week, the index was down nearly 1 percent and formed a Doji candlestick pattern on the weekly timeframe, indicating indecision among bulls and bears.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the short-term trend of Nifty remains weak amidst range movement.

"A decisive upside above 23,400 could only open renewed buying enthusiasm in the market. Immediate support is placed at 23,100," he said.

The weekly options data indicated that 23,500 is expected to be the immediate hurdle for the Nifty 50, with immediate support at 23,200.

On the Call side, the 24,000 strike still holds the maximum open interest, followed by the 23,500 and 23,700 strikes, with maximum writing at the 24,000 strike, and then at the 23,600 and 23,700 strikes. On the Put front, the maximum open interest was seen at the 22,700 strike, followed by the 22,500 and 23,200 strikes, with maximum writing at the 22,700 strike, and then at the 22,900 and 23,200 strikes.

Bank Nifty

The Bank Nifty has decisively negated the higher highs-higher lows formation as well as the upward rally of the last three consecutive sessions, falling 738 points (1.5 percent) to 48,541. The index has formed a bearish candlestick pattern on the daily charts and is sustaining well below all key moving averages, signaling weakness.

On the weekly timeframe, the banking index was down 0.4 percent and formed a small bullish candle with a long upper shadow and minor lower shadow, indicating the unsustainability of higher levels.

"Bank Nifty rejected the 8-day moving average but held steady above the key support at 48,500. A break below this level could test 47,900 swing lows," Anshul Jain, Head of Research at Lakshmishree Investments, said.

However, resilience at current levels hints at a potential bounce towards 49,600 before any fresh weakness sets in, according to him.

Meanwhile, the India VIX, the volatility index, remained at higher zones, making the bulls uncomfortable. The VIX rose by 1.83 percent to 15.75 on Friday, while for the week, it was up 5.58 percent.