Technical View: Nifty breaks 50-week EMA, sustaining below it can drag index towards November low; Bank Nifty at fresh 7-month low

Nifty Downtrend

The bulls seem to be finding it very tough to gain control over Dalal Street, considering the consistent selling pressure during the past week. The Nifty 50 has broken its upward-sloping support trendline and has fallen slightly below the 50-week EMA (Exponential Moving Average of 23,442), accompanied by a negative bias in the momentum indicators, signaling weakness ahead. Furthermore, the 10-day EMA line is on the verge of breaking below the 200-day EMA. If this happens, the selling pressure may widen further.

Hence, if the index sustains below the 50-week EMA, the first target would be the November low of 23,263, followed by 22,800 (the low of the big green candle on June 7), which will act as the next support. However, if it holds, a recovery towards the 23,500-23,700 range can be expected in the upcoming sessions, experts said.

The Nifty 50 opened higher and made several attempts to hit 23,600 amid volatility, but failed and finally finished at 23,432 (the lowest closing level since November 21, 2024), down 95 points. This formed a bearish candlestick pattern on the daily charts, continuing the formation of lower highs for the sixth consecutive session.

On the weekly timeframe, the index was down 2.4%, snapping two weeks of gains and forming a long bearish candlestick pattern. The downward movement in momentum indicators signals further weakness.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the Nifty is currently placed within a converging triangle on the daily chart and is now attempting a downside breakout at the lower end of the triangle.

"The next lower supports to be watched are around the 23,260-23,000 levels. Immediate resistance is at the 23,600 level," he said.

As per the weekly derivative data, the maximum Call open interest was observed at the 24,500 strike, followed by the 24,000 and 23,800 strikes, with maximum Call writing at the 24,000 strike, followed by the 23,800 and 23,500 strikes. On the Put side, the 22,500 strike holds the maximum open interest, followed by the 23,000 and 23,500 strikes, with maximum Put writing at the 23,400 strike, and then at the 23,000 and 23,500 strikes.

The above weekly options data indicates that the Nifty may see support at 23,000 and resistance at 23,800 in the near term.

Bank Nifty

The Bank Nifty also saw a lower high formation for the sixth consecutive day, forming a long bearish candlestick pattern on the daily timeframe after decisively breaking down its support trendline. The index dropped 769 points (1.55%) to 48,734, marking its lowest closing level since June 4 (the Lok Sabha election results day).

On the weekly charts, the index formed a large bearish candlestick pattern, declining 4.42%, marking the biggest loss since the week ended December 20, 2024, signaling weakness.

"The short-term formation is weak, and a pullback rally is possible only after a decisive break above 49,500," said Amol Athawale, VP-Technical Research at Kotak Securities.

According to him, if this level is surpassed, the index could bounce back to the 50,000-50,200 range. Conversely, "as long as it trades below 49,600, weak sentiment is likely to continue. On the downside, 48,300 and 48,000 are key support zones for traders," he added.

Meanwhile, the India VIX, the volatility index, rose 1.76% to 14.92, which also favors the bears. For the week, it was up 10.16%.

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