It was yet another disappointing week of trade for NIFTY, as losses extended for the fifth consecutive week. The curtailed trading week, however, began on an encouraging note, but the optimism was short-lived as sellers effectively utilized higher prices, resulting in prices retesting key support levels. Thereafter, some buying emerged, which helped prices stay afloat above the crucial 23000 mark and eventually secure a weekly close at the 23346 mark, registering a loss of 0.22%.

As highlighted in our prior commentaries, prices hovering close to crucial swing supports, coupled with oversold readings across market breadth and technical indicators, have helped the index stage a bounce over the past few days. A quick glance at the weekly charts also indicates a clear rejection from the 23100–23000 band, pointing towards the presence of strong demand at lower levels. However, this recovery has had little impact on the overall technical structure, with the setup continuing to remain cautious. It would therefore be safe to say that we are not yet out of the woods. As long as the index holds above the aforementioned support band, prices could continue to inch higher, albeit at a grudging pace, given the presence of strong supply at higher levels. Since prices have now retraced more than 50% of the down bar witnessed earlier this week, while the broader trend continues to remain aligned to the downside, the ongoing secondary retracement could extend towards the 23500–23600 band. In such a scenario, we advocate adopting a strategy where dips could be bought into, while rallies towards key resistance zones can be utilized to consider short positions. In terms of levels, while 23100-23000 band remains a sacrosanct support level, immediate support can be found in the 23250-23200 zone. On the flip side, immediate resistance is likely to be encountered in the 23450-23500 band, while the 23600 level, which was a prior support, now likely to act as a resistance now, following the principle of polarity.

A smart recovery seems to have ensued in broader markets today, with breadth cooling off significantly on both NIFTY 50 and NIFTY 500 universe. While the trend still remains aligned to the downside on the NIFTY, venturing into relatively strong stocks, with suitable risk management in place, could turn out to be a fruitful adventure going forward.

Key levels to watch

NIFTY

Support: 23200- 23000

Resistance: 23450- 23500

BANKNIFTY

Support: 56000– 55900

Resistance: 56500– 56700

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