Market cues: After a huge fall in the previous session, Nifty witnessed volatility and closed slightly below 200 DEMA (25,160), resulting in a decline of 0.30 percent on January 21. Experts say that after the recent decline, the possibility of a trend reversal increases due to the formation of an uncertain pattern. However, this will need to be confirmed in the next session. But the overall trend is still in favor of bears and the volatility index India VIX has reached a seven-month high. A fall below 25,900 may take Nifty down to 24,600–24,400 levels. However, a move above 25,300 may push the index towards 25,450-25,600 levels.
nifty view
On January 21, Nifty formed a small green candle with long upper and lower shadow on the daily timeframe, which looks like a doji-like candlestick pattern (not classical), indicating uncertainty in the market. Falling below the 200-day EMA, the index is now trading below all the important moving averages, with the 10-day EMA slipping below the 100-day EMA and the 20-day EMA slipping below the 50-day EMA. Moreover, the index has dropped below the lower Bollinger Band. RSI remained in the oversold zone at 27.89, while MACD remained below the signal and zero line, the histogram showed further weakness. All this indicates continued weakness and increased volatility.
Rupak Dey, Senior Technical Analyst at LKP Securities, says that when the 200 DMA is on the verge of being broken, there is usually a stir in the market and the outcome is rarely clear. In the next few days, there may be a lot of volatility in the Nifty 50 index. On the downside, support is at 25,125. A decisive decline below this level may cause further panic in the market. On the upside, resistance on closing basis lies at 25,200.
bank nifty view
Bank Nifty formed a bearish candle with long upper and lower shadows on the daily chart, indicating further weakness amid volatility. Falling 1 per cent on Wednesday, the index slipped below the 50-day EMA, although it remains above the long-term moving average (100-day 200-day EMA). The index managed to stay above the support level of 58,800 along with the lower Bollinger Band on a closing basis. RSI fell further to 40.77, while MACD maintained a bearish crossover with further decline in the histogram. All this indicates cautious sentiment and downside risks persist.
Rupak Dey says that the banking index has fallen below 50 DMA for the first time since late September last year, which shows increased selling pressure after a long period of good performance. This initial phase of sharp selling is an early warning of a major correction. The index has support at 58,600. A fall below this level could take it towards 58,000–57,700. On the upside, resistance lies at 59,000 and 59,300.
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