The Nifty 50 extended its downward journey for the third consecutive session, though there was some buying interest at lower levels on December 17. The index closed marginally below the 50 percent Fibonacci retracement (of the recent rally from the November low to the December high) and moved closer not only to the 50-day EMA (25,765) and the previous week’s low (25,693), but also to the lower Bollinger Bands intraday. The Bank Nifty also participated in the fall, while the India VIX hit an all-time closing low of 9.84 (down 2.24 percent), signalling comfort for bulls and low uncertainty; however, a sharp market move on either side cannot be ruled out.
Hence, if the benchmark Nifty 50 breaks and sustains below the previous week’s low, severe selling pressure and a fall towards 25,500 could be possible. However, in case of a rebound, 26,000–26,100 are the levels to watch.
The Nifty 50 opened higher and hit an intraday high of 25,929, but wiped out all those gains within the initial hour itself and extended its downward journey as the day progressed. The index closed at 25,819, down 42 points, and formed a bearish candle with upper and lower shadows on the daily timeframe, indicating weakness amid volatility.
The index remained below short-term moving averages and the midline of the Bollinger Bands. The RSI declined to 46.47, and the Stochastic RSI turned bearish, while the MACD sustained below the reference line with weakness in the histogram. All these indicators suggest caution and a bearish bias.
“The previous swing low zone of 25,700–25,650 will act as an important support. If the index slips below the 25,650 level, it could trigger a further correction up to the 25,500 level,” said Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities.
On the upside, the zone of 25,950–26,000 will act as a crucial hurdle for the index. Any sustainable move above 26,000 could lead to a pullback rally up to the 26,200 level, he added.
Weekly options data indicated that the Nifty 50 could trade in the 25,500–26,000 range in the short term.
The maximum Call open interest was placed at the 26,000 strike, followed by the 25,900 and 26,300 strikes, with maximum Call writing at the 26,000, 25,900, and 25,850 strikes. Meanwhile, the 25,500 strike held the maximum Put open interest, followed by the 25,800 and 25,300 strikes, with maximum Put writing at the 25,800, 25,350, and 25,400 strikes.
Bank Nifty
The Bank Nifty also traded lower and closed at a one-week low, down 108 points at 58,927, forming a bearish candle on the daily charts. The banking index almost reached the previous week’s low (58,800) intraday; hence, a decisive fall below this level could open the door for a bear attack.
The index also remained below short-term moving averages, and the momentum indicators are aligned with the same, signalling caution.
The RSI is forming lower tops, indicating weakening strength in the index. “On the downside, immediate support is placed at the 58,800 level, while resistance is seen near 59,300. A decisive breach below 58,800 could further drag the index towards its 50-day SMA, positioned around 58,350,” said Vatsal Bhuva, Technical Analyst at LKP Securities.
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