Technical View: Nifty may achieve H&S pattern target of 23,200 if it decisively falls below 200 DEMA

Nifty Technical View

The Nifty 50 extended its downtrend and sustained a lower lows formation for the sixth consecutive session, closing slightly below the 200-day Exponential Moving Average (DEMA) of 23,542 with moderate losses on November 14. Considering the prolonged weakness, the index may reach its second target of the Head and Shoulders pattern (23,200) if it falls sharply below the 200 DEMA in the upcoming sessions, experts said. On the upside, 23,800 may act as an immediate resistance.

After initial volatility, the Nifty 50 rebounded to 23,676, the day's high, but was unable to sustain those gains for long. The index shed all its gains in late morning trades and remained range-bound for the rest of the session. It finished at 23,533, marking the lowest closing since June 21, falling 26 points and forming a Gravestone Doji-type candlestick pattern on the daily charts, indicating bearish sentiment.

"This suggests a 'sell on rise' approach as the index hovers in an oversold zone near a key EMA level. A bounce is likely, but it should be seen as an opportunity to sell," Rupak De, Senior Technical Analyst at LKP Securities, said.

According to him, if the Nifty breaks below the 200-day EMA, selling pressure could intensify. "The index has support at 23,450, with resistance expected at 23,650, framing the short-term trading range," he added.

The index lost 2.55 percent during the holiday-shortened week, forming a long bearish candlestick pattern with a small upper shadow on the weekly scale. It extended its weakness for the second consecutive session, losing 10.4 percent from the record high of 26,277 on September 27.

The monthly options data indicated that 23,000 is expected to be a key support zone, while resistance is placed at 24,000 on the higher side.

On the Call side, the maximum open interest was seen at the 24,000 strike, followed by the 24,500 and 25,000 strikes, with the most significant writing at the 24,000 strike, followed by the 23,500 and 23,600 strikes. On the Put side, the 23,000 strike holds the maximum open interest, followed by the 23,500 and 24,000 strikes, with maximum writing at the 23,100 strike, followed by the 22,200 and 23,500 strikes.

Bank Nifty

The Bank Nifty managed to defend the 200 DEMA (49,906) and closed 91 points higher at 50,180, forming a bullish candlestick pattern with a long upper shadow resembling an Inverted Hammer pattern on the daily timeframe, which is a bullish reversal signal.

"The 200 DEMA support is placed near 49,900, and if the index manages to respect it, then it could witness a pullback move towards the 50,500-50,600 levels, where the short-term trendline resistance is placed," Hrishikesh Yedve, AVP of Technical and Derivatives Research at Asit C Mehta Investment Intermediates, said.

Overall, the short-term trend is down, but as long as the Bank Nifty holds above 49,900, a pullback rally could be possible, according to him.

Volatility dropped after the previous day's rally but still remained at higher levels. Hence, the bulls need to be cautious. The India VIX declined by 4.28 percent to 14.78.