Technical View: Nifty's 200-DMA under major threat as geopolitical tensions fuel oil rally and spike VIX; Bank Nifty slips below 61,000

Nifty outlook for February 20

• India VIX rallies 10.12% to 13.46, signaling discomfort for bulls
• Falling Nifty decisively below 25,300–25,200 zone can bring bears in power
• In case of bounce back, Nifty may face resistance at 25,500–25,600 zone

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The Nifty 50 almost wiped out all its previous three days’ gains in a single session on February 19, as bears took complete control of the market, sending all sectors into the red amid geopolitical tensions between the US and Iran. The tensions pushed oil prices higher and raised inflation concerns.

The index slipped below all key moving averages (10-, 20-, 50-, and 100-day EMAs) in a single session and moved closer to the 200-day SMA (25,300) for the second time during the current week. Notably, on Monday (February 16), it touched an intraday low of 25,373 and rebounded sharply.

Even the India VIX, also known as the fear gauge, saw a steep rally of 10.12 percent to 13.46, signaling discomfort for bulls and increasing uncertainty. Sustaining above the 13 zone could pose a major risk for bulls.

Hence, if the index decisively breaks the 25,300–25,200 zone (200-day SMA and EMA), the filling of the long bullish gap of February 3 (25,108–26,341) cannot be ruled out in the next few sessions. However, holding above these levels could renew buying interest, with the index facing resistance in the 25,500–25,600 zone, which are crucial levels for regaining strength, experts said.

The Nifty 50 opened higher at 25,873 and tested an intraday high of 25,885, but immediately erased those opening gains and extended its sharp decline as the day progressed. The index touched a day’s low of 25,389 before closing at 25,454, down 365 points (1.41 percent — the biggest single-day fall since February 1).

The benchmark index formed a long bearish candle and almost engulfed the previous three green candles. The RSI stood at 45.60, while the Stochastic RSI turned bearish. The MACD inched down toward the zero line and signal line, with fading momentum in the histogram. All this indicates weakening momentum and a possible continuation of the downward trend.

Technically, the day’s market action indicates the formation of a ‘Bearish Engulfing’ pattern and a faster retracement of the previous three sessions’ range on the downside within a single session. This is not a good sign, said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the short-term trend of the Nifty reversed sharply downward on Thursday after a minor bounce-back. “A slide below 25,400 could drag the Nifty down to the next support of 25,200–25,100 levels in the near term,” he said.

Monthly options data indicate a 25,000–25,800 trading range for the Nifty 50 in the short term, as a breakout on either side could provide firm direction to the market. The 25,000 strike holds the maximum Put open interest, while the maximum Call open interest is placed at the 25,800 strike. Further, the PCR (Put-Call Ratio) dropped by 0.51 in a single session to 0.71, indicating increased bearish positioning.

Brent crude oil prices broke out of the consolidation range of the previous three weeks on the upside and climbed above $71 per barrel on Thursday, exacerbating inflationary concerns and triggering heightened market volatility amid fears of bottlenecks in the Strait of Hormuz. In fact, prices were trading at the upper Bollinger Bands at the time of writing this article, rising 22 percent in the last two months.

Bank Nifty

The banking index also witnessed significant selling pressure on Thursday, falling 811 points (1.32 percent) to 60,740. It formed a long bearish candle on the daily timeframe, which engulfed the previous two red candles, suggesting a potential reversal or at least a pause following the recent rise.

Though the Bank Nifty managed to sustain above the 10-day EMA on a closing basis, the index remains well above other key moving averages.

The RSI entered a bearish crossover and is trending lower, indicating weakening momentum. The Stochastic RSI also showed a negative crossover. The MACD inclined downward, though it held above the reference line, while the histogram signaled fading momentum. All this indicates a loss of bullish strength.

“The bullish trend appears to be waning after the formation of a large red candle on the daily chart. Overall, the sentiment looks weak,” said Rupak De, Senior Technical Analyst at LKP Securities.

According to him, on the lower end, support is seen at 60,500, followed by 60,000 as a crucial level. On the higher end, resistance is placed at 61,200.