Nifty started the day on a flat note; however, as the session progressed, prices moved higher during the first half and marked an intraday high of 23425. Thereafter, follow-up buying was missing, and the index gradually slipped lower in the second half. The weakness intensified towards the close, erasing the entire morning gains and eventually ending tad above the 23200 mark with a marginal cut of around 0.12%.

Prices continue to trade on a cautious note, with back-to-back small-bodied candles visible on the daily chart. Technically, the structure remains weak, with recent evidence of a trendline breakdown, formation of lower tops and lower bottoms, and prices trading below key moving averages. Until these averages are reclaimed, the undertone is likely to remain weak. In such a scenario, the 20DEMA placed around 23550 and the 89DEMA around 23850 are seen as stiff hurdles, and until these levels are crossed on a sustained basis, aggressive long positions should be avoided. On the downside, Nifty continues to find support in the 23100–23000 zone, which coincides with the psychological mark as well as the 61.8% retracement of the entire rally witnessed during April. One of the key reasons Nifty has been able to defend this support zone is the relative strength visible in Bank Nifty. While the banking space witnessed mild profit booking today, it continues to hold its recent bullish breakout. The next move in Bank Nifty is likely to play a crucial role in determining whether Nifty manages to defend the 23000 zone or eventually breaks below it. For now, the ratio analysis between Nifty and Bank Nifty suggests that the latter is likely to continue outperforming the former. Traders are therefore advised to align their positioning accordingly while keeping a close watch on the aforementioned levels.

Key levels to watch

NIFTY

Support: 23100 – 23000

Resistance: 23500 – 23600

BANKNIFTY

Support: 54700 – 54500

Resistance: 55500 – 55800

Rajesh Bhosale, Technical Analyst, Angel One