Technical View: Nifty needs to clear 50-DEMA hurdle for northward journey; momentum indicators remain unsupportive, Bank Nifty defends 60,800 again

Nifty outlook for February 26

• Weekly options data suggests resistance for Nifty at 25,500–25,700 zone, while crucial support at 25,000
• Momentum indicators remain unsupportive
• Bank Nifty defends 60,800 again

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The Nifty 50 bounced back with moderate gains amid volatile and range-bound trading, closing off the day’s high on February 25. The recovery may have been partly supported by short-covering in beaten-down stocks and a decline in the VIX. The index touched the 20-, 50-, and 100-day EMAs, as well as the midline of the Bollinger Bands, but failed to sustain those levels due to profit-booking pressure. Additionally, momentum indicators did not provide adequate support.

On the upside, for a consistent upward rally, the benchmark index needs to deliver a sustainable close above the 25,600–25,700 zone, which coincides with the above-mentioned key moving averages and the falling resistance trendline zone. Such a breakout could pave the way for a rally towards the psychological 26,000 mark. On the downside, the index has been defending the 25,400 level on a closing basis since last week. This remains an immediate and crucial support level, below which 25,300 will be the next level to watch, according to experts.

The Nifty 50 opened higher at 25,513 and climbed to 25,653 (its 50-day EMA). However, it witnessed profit booking in late morning trade and remained range-bound for the rest of the session. The index rose 58 points (0.23 percent) to close at 25,483, forming a small-bodied bearish candle with a long upper shadow on the daily charts, indicating a lack of strength in the bounce-back and supply pressure at higher levels.

The RSI moved upward but remained below the signal line at 46.77. The MACD extended its bearish crossover with a further downtick in the histogram, while the Stochastic RSI has sustained a negative crossover for a week. All these indicators point to weak underlying momentum.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, a bearish descending triangle pattern is unfolding. The series of lower highs after bouncing back from lower support levels signals a sell-on-rise opportunity in the market ahead.

He added that crucial overhead resistance is placed around the 25,700–25,800 zone, while immediate support lies at 25,400–25,350 levels.

Meanwhile, the fear gauge, India VIX, cooled below the 14 mark, declining 4.68 percent to 13.49 and extending its downtrend for the third consecutive session, which provided some comfort to bulls. However, it needs to drop and sustain below the 12 level, as well as below its moving averages, to bring bulls back into action.

The weekly options data suggests that the 25,500–25,700 zone is expected to act as key resistance, with crucial support at 25,000 and immediate support at 25,400.

The maximum Call open interest was observed at the 25,600 strike, followed by the 25,700 and 26,000 strikes. The maximum Call writing was seen at the 25,600, 25,700, and 25,650 strikes. On the Put side, the 25,500 strike holds the maximum Put open interest, followed by the 25,000 and 25,400 strikes. Maximum Put writing was observed at the 25,400, 25,500, and 25,450 strikes.

Bank Nifty

The Bank Nifty also traded within the previous day’s range and defended not only the 10-day EMA and the 61,000 zone but also the 23.6 percent Fibonacci retracement level (at 60,800 of the rally from 57,783 to 61,765) on a closing basis. This is a positive sign, although the index ended 4 points lower at 61,043.

The banking index formed a small-bodied bearish candle with both upper and lower shadows on the daily charts, indicating range-bound trading following recent weakness. The 60,800 level is expected to be a crucial zone, as a decisive fall below it could open the door to the 60,000–59,900 zone, which coincides with the 50-day EMA and the low of the February 16 rally. However, consistent holding above this level in the upcoming sessions could raise the possibility of a move toward a record high.

The daily RSI failed to climb above the 60 mark and remained below the signal line at 57.09, suggesting a pause in the ongoing bullish momentum. The MACD, which is sloping downward, has also seen its gap with the signal line narrow further, signalling fading momentum. The Stochastic RSI has remained below the reference line for a week. All these indicators suggest weakening momentum.

According to Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities, immediate resistance is placed in the 61,400–61,500 zone. Any sustainable move above this zone could result in Bank Nifty extending its upmove towards 62,000, followed by 62,500 in the short term.

On the downside, the 60,800–60,700 zone is likely to act as immediate support, he added.