Benchmark index Nifty 50 remained in a tug-of-war between bulls and bears on Wednesday, trading in a volatile manner for a third consecutive session. After a muted opening at 22,847 points, the index attempted to reclaim 23,000 in the initial hour of the session. However, it quickly erased all gains and ended flat at 22,933.
As a result, the index formed a bullish candle with an upper shadow on the daily chart. Barring IT, pharma, and FMCG, other major sectoral indices ended the day’s trading positive to flat. The advance-decline ratio at 3:1 was heavily inclined toward advancers.
From a technical standpoint, Nifty 50 continues to trade around its crucial support range of 22,700-22,800. The index traded below all its key moving averages with a negative bias. The 14-day relative strength index (RSI) is currently trending sideways, positioned approximately at 38. Additionally, the moving average convergence divergence (MACD) indicator witnessed a negative crossover below the central line.
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Based on O’Neil’s methodology of market direction, MarketSmith India has changed the market status to a ‘Rally Attempt’ from a ‘Downtrend’. Monday’s session was considered day one of an attempted rally as the Nifty closed in the green. The Nifty has not breached the correction low of 22,725 since day one. Hence, Wednesday’s action qualified as day three of an attempted rally, prompting the change in market status.
From here, MarketSmith India would prefer to see a follow-through day before shifting the market status to a ‘Confirmed Uptrend’. Should this occur, the focus will be on ideas that show the best relative strength with good accumulation. Stocks that recover the quickest tend to lead the next run.
On the other hand, if the Nifty breaches its recent low of 22,725, the market status will move back to a ‘Downtrend’.
Looking ahead, the immediate strong support is 22,800-22,700. Falling below this range may turn the Nifty 50 more negative. The index has been unable to close above 23,000 for the past three trading sessions. Hence, sustainable trading above 23,000 may attract some bounceback toward the 23,350-23,400 range.
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Bank Nifty opened on a negative note on Wednesday. However, the index later witnessed buying interest from the lower level, which helped it close on a positive note.
On Tuesday, the index formed a bullish candle with a higher-high and higher-low price structure on the daily chart and reclaimed its 21-DMA. The upward movement was primarily driven by buying interest in leading banking stocks like ICICIBANK, HDFCBANK, KOTAKBANK, and AXISBANK. The index opened at 48,895.35, traded in the 49,628.25-48,804.00 range, and closed at 49,570.10.
The 14-day relative strength index (RSI) slightly moved upward and is currently positioned at 50. The moving average convergence divergence (MACD) is trading with a positive crossover on the daily chart below its central line.
Based on O’Neil’s methodology of market direction, MarketSmith India downgraded the market status to an ‘Uptrend Under Pressure’ on Friday due to technical weakness and an elevated number of distribution days.
The status will be changed to ‘Downtrend’ if the distribution day count increases or if Bank Nifty fails to hold above the correction low of 47,898.35.
If the index retakes 50,641.75 (its recent rally high), the market status will be changed back to ‘Confirmed Uptrend’.
Bank Nifty reclaimed its 21-DMA in the previous session, indicating a potential buying interest from the lower levels. If this upward momentum sustains, the index may retest its 200-DMA (50,148) in the coming sessions. However, on the downside, immediate support is placed near 48,700-48,500.
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