Technical View: Hope for rebound remains as long as Nifty defends 26,000 amid consolidation as VIX hits new closing low

Nifty Outlook for December 26

The Nifty 50 failed to defend the 26,200 level on a closing basis for another session, closing moderately lower after consolidation on December 24. However, market participants remained hopeful for a resumption of the Santa rally, given favourable technical and momentum indicators along with the India VIX hitting a new closing low. As long as the index sustains above the 26,000 support level—which coincides with the 10- and 20-day EMAs as well as the midline of the Bollinger Bands—a rally toward 26,325–26,500 is possible once the index decisively clears 26,200, experts said.

The Nifty 50 opened flat and climbed to an intraday high of 26,236, but gradually wiped out those gains from late morning deals onward. The index slipped below 26,200 in the afternoon and closed at 26,142, down 35 points. It formed a red candle with an upper shadow on the daily charts, indicating an inability to sustain at higher levels, although the higher high–higher low formation continued.

Overall, the market action over the last two sessions signals a breather after a stellar rise from the lows, which could be an uptrend continuation pattern.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the present lacklustre movement in the market could be short-lived, and the Nifty could bounce back sharply from the lows in the near term. “Immediate support is placed at the 26,000 level, and the upside resistance to be watched is around 26,300,” he said.

The index traded well above all key moving averages, with short-term moving averages trending upward. The RSI edged slightly lower to 57.18 but continued to remain well above the reference line. The MACD maintained a positive crossover with further upside in the histogram. The Stochastic RSI also sustained a bullish crossover. All these indicators suggest the continuation of a healthy trend.

The monthly options data suggested a resistance range of 26,200–26,500, with crucial support at 26,000 for the Nifty 50.

Bank Nifty

The Bank Nifty also ended the session lower at 59,184, down 116 points, forming a bearish candle with an upper shadow on the daily timeframe. This indicated a failure to sustain the 59,400–59,550 resistance zone, which is required for a further upward move toward the 59,800–60,000 levels.

The banking index failed to sustain above the midline of the Bollinger Bands for the second consecutive session. It also closed below the 10-day EMA and intraday tested the 20-day EMA as well as the falling resistance trendline (around 59,130). A decisive fall below the 59,100 level could bring bears back into action, followed by key support at 58,800–58,700.

The RSI, at 53.55, turned bearish, although the Stochastic RSI remained above the reference line. The MACD also stayed below the reference line, though the histogram weakness gradually faded further. All these indicators suggest a cautious undertone in the near term.

“On the downside, the index has formed a good base around 58,800, while major resistance is placed near the 59,550 level. An eventual breakout on either side of this consolidation range is likely to set up the next directional move for the index,” said Hrishikesh Yedve, AVP – Technical and Derivative Research at Asit C Mehta Investment Intermediates.

Meanwhile, the India VIX ended at a fresh closing low of 9.19, down 2 percent, and continued its downtrend for another session, which is favourable for bulls. However, being at such low levels could also lead to sharp market moves.