Market recap: Nifty50’s performance on 24 February
Nifty50, India’s benchmark index, extended its losses for the fifth consecutive session and closed at 22,553.35 on Monday. Taking cues from the global market, the index saw a gap-down opening at 22,609 and continued to trade in a narrow range of 22,518–22,650. Weak economic data and steady inflation in the US raised concerns of slowing business activity and weakening consumer demand. Barring FMCG and auto, all the major sectoral indices closed lower. The advance-decline ratio was skewed toward decliners, with a ratio of approximately 1:3.
From a technical perspective, the index closed below its crucial support zone of 22,700–800. The 14-day relative strength index (RSI) is trending downward and is currently positioned around 30. Additionally, the moving average convergence divergence (MACD) indicator has recently witnessed a negative crossover below the zero line.
According to O’Neil’s methodology of market direction, we shifted the market status to a ‘downturn’ on Friday, as Nifty breached its recent correction low of 22,725. Looking forward, we will shift the market to a ‘rally attempt’ when Nifty closes in the green for the first time or closes in the upper half of the day’s range and stays above that low for three straight sessions. From there, we would have to see a follow-through day before shifting the market back to a ‘confirmed uptrend’.
Looking ahead, the index has breached its crucial support zone of 22,700–22,800. The overall bias of the market remains weak, and immediate support is placed at 22,000–21,800. Any pullback can be considered a selling opportunity on the rise. On the upside, immediate resistance is placed around 22,800–23,000.
Also Read: While the big bulls have moved on, retail investors are stuck holding the debris
How Nifty Bank performed
Bank Nifty opened on a negative note on Monday and remained in negative territory throughout the session. Yesterday, the index formed a dragonfly doji candlestick pattern on the daily chart, indicating a weakening in selling pressure. However, yesterday was the third consecutive bearish candle with a lower-high and lower-low price structure on the daily chart. The index opened at 48,619.80, traded in the range of 48,748.40–48,281.90, and closed at 48,651.95.
The 14-day relative strength index (RSI) has slightly bent downward and is currently positioned at 40. The moving average convergence divergence (MACD) is trading with a negative crossover and is trending below its central line.
According to O’Neil’s methodology of market direction, we downgraded the market status to an ‘uptrend under pressure’ on 14 February, due to technical weakness and an elevated number of distribution days. We will change the status to a ‘downtrend’ if the distribution day count increases or if Nifty Bank fails to hold above the correction low of 47,898.35. On the flip side, the market status will be changed back to a ‘confirmed uptrend’ if the index retakes 50,641.75 (its recent rally high).
This major sectoral index is trending below all its key moving averages with a negative bias in the broader range of 48000–5000. A breakout or breakdown on either side may lead the index in the same direction in the coming days. The immediate strong supports are placed in the range of 48,000–47,700.
Also Read: India’s valuation edge over China and other EMs may face pressure, warns Tata AMC’s Singh
Stocks recommended by MarketSmith India:
Abbott India Ltd.: Current market price ₹ 29,813| Buy range ₹ 29,000–30,000| Profit goal ₹ 34,000| Stop loss ₹ 27,700| Timeframe 3–4 Months
Union Bank of India: Current market price ₹ 117.3 | Buy range ₹ 114–118| Profit goal ₹ 139| Stop loss ₹ 107| Timeframe 3–4 Months
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.