Technical View | Nifty breaks long support trendline; 17,500 is crucial

The Nifty50 saw a sharp gap down opening on February 22, and closed with the biggest single-day loss since January 27, ahead of the monthly expiry of February futures & options contracts tomorrow. The fresh nuclear warnings by Moscow to the West, and caution ahead of FOMC minutes tonight and RBI monetary policy minutes later today weighed on the sentiment.

The index remained under pressure throughout the session to hit a day’s low of 17,529, and closed with 272 points loss at 17,554, forming a long bearish candle on the daily charts with making lower highs lower lows for four-day in a row.

The index has broken the 200-day EMA (exponential moving average – 17,592) as well as upward sloping support trendline, adjoining lows of June 2022 and February 2023, indicating bears have more strength than bulls. Hence, the next support is placed at 17,500, followed by crucial support at 17,350, which is around the Budget day’s low as well as near 200 DMA (daily moving average). If the said levels get broken, then sharp selling pressure can’t be ruled out, experts said.

“Nifty50 index is trading in a downtrend with lower high and lower low formation intact on the daily and weekly chart. The momentum indicator RSI is on the verge of a breakdown and is likely to enter the weak zone,” Rupak De, Senior Technical Analyst at LKP Securities said.

He further said the view remains bearish as long as the index stays below the 18,000 mark and can slide towards 17,400-17,200 levels.

On the monthly Option front, we have seen maximum Call open interest at 18,000 strike, which is expected to be a crucial resistance level for the Nifty50, followed by 17,700 strike, with Call writing at 17,700 strike, then 17,600 & 17,800 strikes.

On the Put side, there was maximum open interest at 17,500 strike, which is likely to be crucial support in coming sessions, followed by 17,000 strike, with writing at 17,400 strike, then 17,500 strike.

The above Option data indicated that the Nifty50 may see a broad trading range of 17,350-18,000 level in coming sessions due to a spike in volatility.

Volatility has been rising from the last five sessions and spiked on Wednesday which paved way for the bears in the market. India VIX surged 11.27 percent from 14.01 to 15.59 levels.

Bank Nifty opened on a negative note at 40,494 and remained under sustained selling pressure from the initial tick of the session. Selling was seen across the financial space and it is forming lower highs – lower lows structure on a daily scale from the last four sessions.

The banking index fell 678 points to 39,996 and now trading near its 200-day EMA (40,007). It has formed a big bearish candle on a daily scale and breached the upward trending support trendline adjoining lows of June 2022 and February 2023.

“Resistances are gradually shifting lower and now till it holds below 40,250 level, weakness could be seen towards 39,750 then 39,500 zones while on the upside, the hurdle is expected at 40,250 then 40,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.

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