NIFTY witnessed a muted session despite volatile price action. Following a gap-down opening, sellers initially maintained the bearish momentum, dragging the index lower to test the 22500 mark. However, a sharp turnaround thereafter helped the index recoup all its early-session losses. As prices approached the previous session’s closing level, bullish momentum faded, resulting in sideways price action for the remainder of the session. NIFTY eventually closed at 22698, down 0.22% for the day.

Despite the volatile price action witnessed during the session, the overall technical setup remained unchanged. NIFTY continued to oscillate within the preceding four-day trading range, with demand once again emerging in the 22380–22500 band, while sellers continued to cap the upside around the 20 DEMA near the 22800 mark. Going forward, unless the index delivers a convincing breakout above or below the aforementioned range, the ongoing sideways price action is likely to persist. In this scenario, adopting a buy-on-dips approach near the support zone and utilising rallies towards the overhead resistance band to initiate short positions is likely to offer a more favourable risk-reward proposition. At the same, participants should carefully monitor the above-mentioned levels for any breakout, which might offer a trending opportunity, following this ongoing coiling price action. In terms of levels, while the 22500-22380 band is an immediate support band, a much stronger and sacrosanct support is placed at the 22200-22100 zone. On the flip side, the 22800-level aligning with the 20 EMA is an immediate hurdle, followed by a much strong resistance at the 23000-23150 band, aligning with the 50 EMA.

The severe profit booking observed in MIDCAP and SMALLCAP universe last week, has distorted their technical set ups significantly, and also signalled some reversals in the ratio charts of these indices, when plotted against the NIFTY50. Going forward caution should be adhered to, will entering into short term trading bets in the MIDCAP and SMALLCAP stocks.

Key levels to watch

NIFTY

Support: 22500- 22380

Resistance: 22800- 23000

BANKNIFTY

Support: 54000– 53800

Resistance: 54500– 54850

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