Technical View: Weak Nifty structure below 50-DEMA may aid bears; Bank Nifty defends 58,800, VIX at fresh lows

Nifty outlook for December 19

The Nifty 50 has defended not only the 50-day EMA (above 25,760) but also the upward-sloping support trendline. However, it extended its downtrend and continued the lower high–lower low structure for the fourth consecutive session, closing below the 50 percent Fibonacci retracement (of the rally from the November low to the December high) on December 18.

The index is hovering near its crucial support zone placed at 25,760–25,700. A decisive break below this zone could open the door for a fall towards 25,500–25,450, followed by 25,300. On the upside, the 25,900–26,000 zone is expected to act as resistance in the upcoming sessions, according to experts.

The Nifty 50 opened lower and hit an intraday low of 25,726. After initial volatility during the first hour, it rebounded to 25,902 but lost those gains in the afternoon session and closed at 25,816, down 3 points.

The benchmark index formed a bullish candle with a long upper shadow and a minor lower shadow on the daily charts, indicating a slowdown in selling momentum and a resumption of volatility near the lows.

The index remained below short-term moving averages and traded near the lower Bollinger Band, with weakness visible in momentum indicators.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the short-term trend of the market continues to be choppy with a weak bias.

“The Nifty is expected to find support around the 25,700–25,650 levels before bouncing back firmly in the next few sessions. Immediate resistance is placed at 25,900–25,950 levels,” he said.

Meanwhile, he feels that the present weakness could be in line with the formation of a new lower bottom, which is yet to be completed. However, the overall chart pattern indicates a possible double bottom or a slightly lower bottom reversal in the near term, he added.

On the options front, the 26,000 strike continues to hold the maximum Call open interest, followed by the 25,900 and 26,500 strikes. The maximum Call writing was observed at the 26,600, 25,800, and 26,200 strikes.

Meanwhile, the maximum Put open interest was seen at the 25,500 strike, followed by the 25,800 and 25,700 strikes, with the maximum Put writing at the 25,600, 25,700, and 25,400 strikes.

The weekly options data suggests that the Nifty 50 may face resistance in the 25,900–26,000 zone, while support is placed at 25,600–25,500 levels.

Bank Nifty

The Bank Nifty also closed lower by 14 points at 58,913 while consistently defending the 58,800 level on a closing basis for another session. The banking index formed a bullish candle with a long upper shadow, resembling an inverted hammer pattern on the daily charts. Buyers attempted to push the index above the 20-day EMA (59,083) but failed to sustain it due to selling pressure at higher levels.

“If the index manages to hold the inverted hammer low of 58,712, short-term relief might be possible. However, a firm break below 58,712 could extend the weakness towards the 58,450–58,000 levels,” said Hrishikesh Yedve, AVP – Technical and Derivative Research at Asit C Mehta Investment Intermediates.

Meanwhile, India VIX, the fear index, hit a fresh closing low of 9.7, down 1.32 percent and continuing its downtrend for the third consecutive session. This provides strong comfort to bulls but, at the same time, indicates the possibility of sharp market moves.