Markets took a breather today, as buyers managed to hold on to the previous session’s lows. The session began on an encouraging note, with prices opening on a gap-up. However, the early morning gains quickly faded as sellers once again exerted pressure at higher levels. After the initial volatility, buyers managed to recoup the lost ground and eventually helped the index close on a more hopeful note at the 23,217 mark, registering gains of 0.43%.

The technical setup remains negative, with trends across all time frames aligned to the downside. That said, as highlighted in our prior commentaries, with market breadth now in highly oversold territory, prices currently located very close to crucial NIFTY support levels, and the formation of a bullish harami candlestick pattern, the setup points towards the presence of strong demand at lower levels. This keeps hopes alive for a relief rally in the coming sessions.

The disparity between the short-term moving averages and prices at this juncture is also at its highest, indicating that a mean reversion move might be in the offing. However, any convincing price breakdown below the prior two-day range would invalidate the bullish candlestick formation and pave the path for much lower levels, given the absence of any clear signs of a reversal on the price chart as yet.

In terms of key levels, while the 23,100–23,000 band remains an immediate and all-important support zone for the NIFTY, the bearish gap in the 23,630–23,600 zone, which aligns with prior session highs, represents a very strong hurdle. Immediate NIFTY resistance is placed in the 23,300–23,400 band.

While markets are now located close to key support levels, and given the correction we have seen over the course of the past month or so, it can be tempting to start venturing into quality names. However, it is advisable at this point in time to wait for a confirmed trend reversal before venturing into aggressive trades.

Key Levels to Watch

NIFTY

Support: 23,100–23,000

Resistance: 23,300–23,400

BANKNIFTY

Support: 55,800–55,700

Resistance: 56,500–56,700

Hitesh Rathi, Technical Analyst – Equity & Derivatives, Angel One