Technical View: Nifty needs to hold 24,750 level to avoid deeper decline, Bank Nifty breaks 100-day EMA

Bank Nifty, Nifty Trend

The Nifty 50 decisively broke the psychological 25,000 mark on October 7, marking a negative start for the week, as bears continue to strengthen their position in the equity markets. All sectors, except IT, participated in the correction. Given the continuation of lower highs and lows, weakening momentum indicators, and rising volatility, if the index fails to defend 24,750 on a closing basis, a deeper decline towards the 24,500-24,400 zone (the 20-week EMA and 100-day EMA, respectively) can't be ruled out, according to experts. However, on the higher side, resistance may be found in the 25,000-25,100 area.

The Nifty 50 opened higher at 25,084 and hit a day's high of 25,143. However, after the first hour, the index turned completely red and extended its downward move, breaking 24,750 (the September low) intraday. It managed to defend the September low on a closing basis, finishing the session at 24,796, down 219 points or 0.87 percent, and forming a long bearish candlestick pattern on the daily charts with above-average volumes, signaling further weakness.

Additionally, the 10-day EMA line is on the verge of falling below the 20-day EMA. If this crossover occurs, further selling pressure may follow in upcoming sessions.

"The index managed to defend the 24,750 level, providing some relief for the bulls. As long as the index holds within the 24,700–24,750 range, a short-term pullback could be possible. However, if Nifty sustains below 24,750-24,700, deeper declines could follow," said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C Mehta Investment Intermediates.

According to weekly options data, the maximum Call open interest was seen at the 26,000 strike, followed by the 25,500 and 25,000 strikes, with maximum Call writing at the 25,000 strike, followed by the 25,100 and 25,500 strikes. On the Put side, the 24,000 strike holds the maximum open interest, followed by the 23,500 and 24,500 strikes, with maximum writing at the 24,700 strike, followed by the 24,000 and 24,100 strikes.

This options data suggests that Nifty may face resistance at the 25,000-25,100 level on the higher side, while support lies at 24,700, followed by the 24,500 zone.

The Bank Nifty has fallen more than the Nifty 50, decisively breaking the 100-day EMA and declining by 983 points or 1.91 percent to 50,479. The index formed a large bearish candlestick pattern on the daily timeframe but managed to defend the September low (50,370) on a closing basis. A decisive fall below this level could drag the index towards August lows.

The structure of lower highs and lower lows has remained intact over the last five sessions. Now, as long as the index remains below the 50,750 zone, weakness could continue towards the 50,000 and 49,500 levels. However, on the upside, resistance is seen at 51,000 and 51,250 zones, according to Chandan Taparia, Senior Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

Volatility extended its upward movement for the third consecutive session and decisively climbed above all key moving averages, which is a negative sign for bulls. The India VIX jumped 6.74 percent to 15.08, its highest closing level since September 6.