Technical View: Trendline breakdown signals caution for Nifty Bulls; next support at 26,100, Bank Nifty outperforms, holds 60,000

Nifty outlook for January 7

• The weekly options data suggested that the Nifty is expected to remain in the 26,000–26,500 range in the short term.

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The Nifty 50 extended its downtrend for the second straight session, falling below the support trendline and losing another one-third of a percent amid volatility on January 6. The index shed nearly 200 points from its record high of January 5, with above-average volumes. Although the index continued to hold above all key moving averages, momentum indicators signalled some caution and the possibility of continued consolidation before forming a new higher bottom.

The next support is placed at 26,100, which coincides with the 10-day EMA and Tuesday’s low. If the index decisively breaks this level, the crucial support of 26,000 will be the level to watch, as a decisive fall below it could shift momentum from bullish to bearish. On the upside, 26,300 can act as a hurdle, according to experts.

The Nifty 50 opened lower and remained range-bound for most of the session. It surpassed the previous day’s close in the morning by hitting the day’s high of 26,274, but could not sustain those levels for long and turned lower for the remainder of the trading day. It touched an intraday low of 26,125 before showing some recovery and closing at 26,179, down 72 points.

The index formed a small red candle with upper and lower shadows on the daily charts, resembling a high-wave or doji-like candlestick pattern, which signalled volatility and indecision among bulls and bears. The MACD stayed above the signal line, but momentum faded slightly in the histogram. The Stochastic RSI turned bearish, while the RSI declined to 55.62, though it held slightly above the reference line. All these indicators suggest caution in the near term.

“After the sharp breakout of the consolidation hurdle around the 26,100–26,200 levels recently, the market has reversed down to the support in its throwback and is expected to find support here as per the change in polarity,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the underlying trend of the Nifty remains weak with choppy movement. “Nifty is expected to bounce back from near the support of around 26,100 levels in the short term. The next resistance to be watched is at 26,400,” he said.

On the options front, the maximum Call open interest was placed at the 26,500 strike, followed by the 27,000 and 26,200 strikes, with the maximum Call writing seen at the 26,500, 26,200, and 26,700 strikes. On the Put side, the 25,500 strike held the maximum Put open interest, followed by the 25,700 and 26,200 strikes, with the maximum Put writing at the 25,500, 25,700, 26,200, and 26,000 strikes.

The above-mentioned weekly options data also suggested that the Nifty is expected to remain in the 26,000–26,500 range in the short term.

Bank Nifty

The Bank Nifty defended the psychological 60,000 mark for another session and outperformed the benchmark Nifty 50, rising 74 points to close at 60,118. It formed a bullish candle with upper and lower shadows on the daily charts, signalling some volatility with range-bound trade. The index continued to sustain well above key moving averages and the support trendline, supported by above-average volumes.

The daily RSI is in a bullish crossover mode with a strong placement around 65, indicating positive momentum, while the MACD remained above the reference line with further strength in the histogram. On the hourly chart, the index continues to trade above its 50 SMA, reinforcing strength.

“A buy-on-dips strategy should be maintained as long as the index holds above 59,300. Immediate support is placed at 59,800, while resistance is seen near the 60,500 levels,” said Vatsal Bhuva, Technical Analyst at LKP Securities.

Meanwhile, India VIX, also known as the fear gauge, dropped to 10.02 after two days of gains, down just 0.05 percent, but it still held above short-term moving averages. This signals some caution for bulls, although they are not at major risk.