Technical View: Formation of high wave pattern raises market rebound possibility; Nifty defends 25,000, the crucial zone for further direction

Nifty outlook for September 24

The Nifty 50 continued its weakness for the third consecutive session, falling moderately on September 23, the weekly F&O expiry day. Notably, the index defended the 10-day (25,150) and 20-day EMA (25,000) on a closing basis, which are short-term moving averages. As long as the index holds above these short-term moving averages, the trend remains favourable for the bulls, although the RSI at 56.79 reported a negative crossover. The MACD has sustained a bullish crossover, with the histogram staying above the zero line, although momentum seems to be fading slightly.

If the index holds above both EMAs, a rebound toward 25,500 is possible in the upcoming monthly F&O expiry week. However, a decisive fall below these levels could bring the bears into action.

The Nifty 50 opened flat and corrected to 25,085 intraday. The index rebounded in the second half and hit an intraday high of 25,262, but again faced selling pressure in the last hour, closing at 25,170, down 33 points.

The index formed a bearish candle with upper and lower shadows, resembling a high-wave candlestick pattern on the daily timeframe, indicating high volatility in the market. Normally, such a pattern formation after a reasonable decline signals the possibility of a near-term bottom reversal.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the healthy downward correction of the last few sessions seems to be ending in the short term.

“Nifty is expected to find crucial support around the 25,000 level, and one may expect a bounce-back from the lows in the coming sessions,” he said.

The monthly options data suggested that the Nifty may remain within the 25,000-25,500 range in the near term.

The maximum Call open interest was placed at the 26,000 strike, followed by the 25,500 and 25,300 strikes, with the maximum Call writing at the 25,500, 25,200, and 26,000 strikes. On the Put side, the 25,000 strike holds the maximum Put open interest, followed by the 24,500 and 25,200 strikes, with the maximum Put writing at the 25,200, 25,000, and 25,100 strikes.

Bank Nifty

The Bank Nifty outperformed the Nifty 50, rising 225 points to 55,510. The banking index took support at 50 and 10-day EMAs on a closing basis and formed a bullish candle with an upper shadow on the daily charts, signalling some pressure at higher levels.

Buying interest emerged in key banking and PSU banking counters. The recovery in the Bank Nifty not only helped cushion broader market sentiment but also highlighted the relative strength within the banking space.

“The price action suggests that the 50-day EMA is currently acting as a crucial short-term support, which is in the zone of 55,200-55,100 levels,” said Sudeep Shah, Head of Technical Research and Derivatives at SBI Securities. He added that on the upside, the zone of 55,800-55,900 will act as a crucial hurdle for the index.

Meanwhile, the India VIX, the fear gauge, rose for the third consecutive session, gaining 0.64 percent to close at 10.63, indicating some caution among the bulls.

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