Technical View: Nifty may see more selling pressure if it breaks key support of 22,700, VIX eases further

Nifty downtrend

The Nifty 50 fell sharply after a four-day consolidation but managed to defend the 22,700 support, which coincides with the downward-sloping support trendline. If the index decisively breaks this support, the selling pressure could drag the index toward 22,500, the next support zone. However, on the higher side, the index faces stiff resistance at the 23,000 and 23,100 levels, where the maximum Call writing is placed. A break above these levels could lead to an upward move toward 23,500, according to experts.

The Nifty 50 remained under pressure throughout the session, hitting an intraday low of 22,720 before closing at 22,796, down 117 points (0.51%). The index formed a bearish candlestick pattern with upper and lower shadows, resembling a high-wave pattern on the daily charts, indicating volatility.

"The Put-Call Ratio (PCR) is deteriorating, slipping from 0.82 to 0.74. A huge addition in 23,100 and 23,000 strike Call options suggests strong resistance at higher levels. The previous swing low of 22,725 was breached today, suggesting a continuation of the decline," said Jatin Gedia, Technical Research Analyst at Mirae Asset Sharekhan.

For the week, the Nifty 50 fell 133 points (0.58%) and formed a Doji-like candlestick pattern on the weekly timeframe, indicating indecision between bulls and bears.

Jatin believes the index is in the final stages of the decline and is likely to start a counter-trend pullback sooner rather than later. Therefore, "we will continue to maintain a positive stance on the index, with a reversal level placed at 22,600," he said.

The monthly options data suggested that the Nifty may remain in the 22,500-23,500 range in the short term.

On the Call side, the maximum Call open interest was seen at the 24,000 strike, followed by the 23,000 and 23,500 strikes, with maximum Call writing at the 23,100 strike, followed by the 22,800 and 23,000 strikes. On the Put side, the 22,000 strike holds the maximum open interest, followed by the 22,500 and 22,300 strikes, with maximum Put writing at the 22,500 strike, followed by the 22,300 and 22,800 strikes.

Bank Nifty

The Bank Nifty fell 353 points to 48,981 on Friday and formed a bearish candlestick pattern with upper and lower wicks, resembling a high-wave like pattern on the daily charts. On the weekly scale, there was a Doji-like candlestick pattern (not a classical one). It fell 118 points for the week.

The index maintained Wednesday's low of 48,800 on a closing basis. Below this level, bears may gain strength, experts said.

"For any decisive move, the index must break out of Wednesday’s range between 49,628 and 48,804. Until then, sideways movement is expected within this zone," said Anshul Jain, Head of Research at Lakshmishree Investments.

According to him, traders can look to go long near the 48,800 support level, targeting 49,600 on the upside. However, "if the Bank Nifty sustains below 48,800, further downside toward 48,400 is likely," he added.

Meanwhile, the India VIX, which measures the expected market volatility, dropped further for the fourth consecutive session, down 1.04% to the 14.53 zone. It now stands below all key moving averages, and if it falls further from here, bulls may enter a more comfortable zone.