The Nifty 50 ended Wednesday's RBI monetary policy session with a loss of 0.76%, failing to extend the recovery seen over the previous two sessions. The index also remained below its 8 day EMA, currently placed near 22,742, indicating that short term momentum is yet to turn favourable.
During the session, Nifty slipped below the previous day's low and formed a lower high and lower low on the daily chart. Although the index attempted a strong recovery after the RBI policy announcement, the rebound could not sustain at higher levels.
Over 550 point recovery from last Thursday's low has now retraced around 38.2%. This puts the 22,490 to 22,546 zone in focus as an important near-term support area.
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Lower Top Formation Needs Confirmation
The index formed a red-bodied candle on the daily chart after opening with a gap down. More importantly, the recovery appears to have faced resistance around the 22,742 to 22,821 zone.
Tuesday's high of 22,776 could now develop into a fresh lower top. However, this structure would gain significance only if the index witnesses further weakness in the next session. Until then, the market may remain within a consolidation phase.
Market Breadth Remains Weak
Weakness was not limited to the benchmark index. Market breadth remained firmly negative, with only 9 of the Nifty 50 constituents ending in positive territory. Nearly 350 stocks in the Nifty 500 also closed lower.
India VIX rose 2.06% to 13.89, reflecting a modest increase in market volatility. At the same time, open interest increased by 2.19% along with the decline in the index, suggesting the addition of fresh short positions.
Momentum Indicators Still Lack Strength
The RSI continues to trade below 40, showing that momentum remains weak despite the recent recovery attempt.
Key Levels to Watch for Nifty
The Nifty now needs to reclaim and close above the 8 day EMA near 22,742 to improve the short term structure. Above this, 22,821 becomes the next important hurdle, as it represents the 23.6% retracement level of the ongoing decline.
On the downside, the 22,490 to 22,546 zone remains crucial. A decisive break below this support area could weaken the structure again and open the way for a retest of 22,413.
For now, the index may remain confined within the broader 22,413 to 22,746 range as the market looks for a clearer directional trigger. A sustained breakout on either side of this range could lead to a stronger directional move.
Stock to Watch: Gland Pharma
Gland Pharma has broken out of an eight week flat base in Stage 2, marking its second base breakout during the ongoing uptrend. The breakout was supported by higher than average volumes, adding strength to the price move.
Its Relative Strength line has moved to a new high, indicating continued outperformance against the broader market. Both short term and long term moving averages are trending higher, while the moving average ribbon remains firmly bullish.
Momentum indicators are also supportive. The Bollinger Bands have started expanding, suggesting an increase in price momentum. The MACD has generated a fresh bullish signal, while the 14 period RSI has moved back into the bullish zone. The Elder Impulse System has also formed a strong bullish bar.
Overall, the technical structure remains positive following the breakout. A sustained move above Rs 3,150 could take the stock towards Rs 3,222. If it sustains above Rs 3,222, the next potential level is around Rs 3,300. Maintain a stop loss at Rs 3,100.
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