Technical View | Nifty sees biggest weekly fall in 8 months, 17,500 vital for pullback rally

The Nifty closed in the red again on February 24, capping a week of losses as the index slipped 478 points in the biggest weekly fall since June 2022. A subdued global economy and a hawkish US Federal Reserve dented the sentiment.

The index opened higher and climbed to the day's high of 17,600 in the early hours but erased the gains in late morning deals. It ended 45 points lower at 17,466, its lowest level since October 17, 2022.

It formed a bearish candle on the daily charts, making lower highs and lower lows for the sixth session in a row.

On the weekly scale, too, it formed a large bearish candlestick, indicating further weakness. Experts, however, said a pull-back rally can't be ruled out after the significant downtrend of the last few sessions, with resistance at 17,600-17,700. The next support lies at 17,353 (the budget day's low) or the 200-day simple moving average (17,368).

"With the market in oversold territory, we could see a quick pullback rally if the index trades above 17,500. Above which, the pullback formation is likely to continue till 17,600-17,750," Amol Athawale, Deputy Vice President-Technical Research, Kotak Securities, said.

As long as the index trades below 17,500, the weak sentiment will continue, he said. The index can retest the 200-day SMA or 17,400 if it slips below 17,500, the expert said.

Though the Nifty corrected and slipped below 17,500, the weekly Option data shows the maximum Call open interest at 17,600 strike followed by 18,000 strike, with Call writing at 17,600 strike, then 17,700 strike.

On the Put side, the maximum open interest is at 17,000 strike, followed by 17,600 strike and 17,400 strikes, with writing at 17,000 strike then 17,600 strike and 17,400 strike.

The broader trading range for the Nifty is expected to be between 17,000 and 18,000, with near-term resistance at 17,600 and support at 17,400.

The volatility cooled down considerably as the India VIX declined 5.9 percent to 14.19 level.

Banking index

Bank Nifty also opened higher at 40,259 and touched the day's high of 40,348 but failed to hold the gains. It ended the session 92 points down at 39,909.

The banking index formed a bearish candle on the daily charts but with higher highs and higher lows, indicating a possibility of a bounce back.

For the week, the index was down more than 1,200 points and formed a long bearish candle on the weekly scale.

Bank Nifty is stuck in a broad range between 39,500 and 40,500, however the undertone remains bearish and one should keep a sell-on-rise approach,h Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, said.

"The index will witness large moves once it breaks out of the mentioned range. The momentum indicator RSI (relative strength index) is trading below the level of 30, which confirms the weakness," Shah said.

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