NIFTY had a discouraging week of trade, with losses extending into the fourth consecutive week. Starting the week on a weak note, sellers dominated proceedings for most of the week. They made a mid-week attempt to assert their control, opening with a notable gap-down, but buyers managed to prevent any further extension of the downside, thereby capping the losses for the week. Thereafter, although buyers attempted to push prices higher, they failed to sustain at elevated levels, resulting in intraday gains being frittered away and the index eventually settling at 23897, registering a weekly loss of 1.15%.

The technical structure for the frontline index remains wary. A bearish crossover of the 20 DEMA below the 50 DEMA indicates further deterioration in the technical setup. Alongside this, a price breakdown on the weekly timeframe below a key upward sloping trendline, which had acted as a strong support since March this year, points towards a potential reversal of the prior uptrend. A 45-degree trendline breakdown on the 0.1% × 3 Point & Figure chart provides further confirmation of the developing bearish setup and the potential trend reversal. The emerging technical structure highlights the need to exercise caution and warrants a clear strategy to avoid venturing into aggressive long trades. In terms of levels, the 23750–23600 band remains an immediate and crucial support zone. A decisive daily close below this band is likely to open the door for a further probe, initially towards the 23450–23400 zone in the short term. On the upside, the 24000–24050 band, which acted as an important support zone until recently, has now turned into an immediate resistance area, followed by a stronger hurdle in the 24150–24200 band.

The P&F X-percent breadth indicator, which was pointing towards an overbought breadth or an overbought market, has cooled down considerably since the beginning of August, reading currently at 35%. That points towards an unlikely proposition of an extended down move in the index. That said, prices remains a leading indicator and unless we observe a turnaround in the price set up, we continue to advocate a need to adhere caution.

Key levels to watch

NIFTY

Support: 23750- 23600

Resistance: 24050- 24200

BANKNIFTY

Support: 56900– 56800

Resistance: 57700– 57800

Hitesh Rathi, Technical Analyst -Equity & Derivatives, Angel One.