It turned out to be an action-packed week for the markets. The week began on a cautious note following the weekend remarks by Prime Minister Narendra Modi. After witnessing weakness during the first two sessions, markets staged a recovery over the following two days. Friday, however, remained largely range-bound, with Nifty eventually ending the week with a cut of over 2%, closing tad below the 23650 mark.

Technically, despite the mid-week rebound, the overall chart structure has weakened, with prices slipping below the short-term moving averages of 20 DEMA and 50 DEMA. Momentum indicator RSI Smoothened, which earlier failed to move beyond the 60 mark, has now slipped below 40, indicating prevailing bearish momentum in the market. During the week, Nifty managed to hold the crucial support of the 50% retracement of the entire April rally from 22182 to 24602, resulting in a longer lower wick formation on the weekly chart. Going ahead, the zone between the 50% and 61.8% retracement levels of the said rally, placed within 23400 – 23100, is likely to act as an important support zone. A decisive break below this band could trigger further downside towards the 22700 zone and lower levels thereafter. On the upside, resistance is expected in the 23900 – 24200 zone, which coincides with the 20 DEMA and 50 DEMA. Beyond this, the recent swing high around 24600, aligning with the 89 EMA, remains a key hurdle in the near term. We sense that Nifty is likely to consolidate within the 23100 – 23900 range, and the next meaningful directional move is likely to emerge only on a breakout from this band. Traders are advised to closely monitor these levels and adopt a buy-on-dips and book-profits-at-higher-levels approach within the range.

Rajesh Bhosale, Technical Analyst, Angel One