- Nifty 50 opened 150 points down but recovered to close 100.95 points higher at 23,483.55
- IT sector led the rebound with higher trading volumes indicating active market participation
- Nifty remains below key moving averages with resistance at 8-EMA 23,641 and 50-DMA 23,689
The Nifty 50 index began Tuesday's session with a gap-down of over 150 points. However, the index formed an open-equals-low candle, with the day's low placed near the trading range seen over the past 15 sessions. This support zone attracted buying interest, helping the bulls regain control during the session.
From the day's low, the index recovered nearly 250 points and closed at 23,483.55, up 100.95 points or 0.43%. With this rebound, the Nifty ended its four-day losing streak.
IT Stocks Lead the Bounce
Trading volumes were higher than the previous session and also above average, indicating active market participation. The recovery was largely led by the IT sector, which extended its recent rally and supported the broader index.
On the daily chart, the Nifty formed a sizeable bullish candle with an open-equals-low structure. However, the index still made a lower high and lower low compared with the previous session. The day's low was placed at 23,229, below the previous low of 23,263.
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Moving Averages Remain a Key Hurdle
Despite advancing by over 100 points, the Nifty continues to trade below all key moving averages, including the 8-EMA placed at 23,641. While an open-equals-low candle is generally considered a positive signal, the index failed to close above the 50% mark of the previous day's bearish candle. A close above that level would have confirmed a bullish piercing candlestick pattern.
Going ahead, immediate resistance is placed at the 8-EMA of 23,641, followed by the 50-DMA at 23,689. For the bulls to regain strength, the index needs to close above this resistance zone.
Above these levels, the 20-DMA near 23,769 is likely to act as the next major hurdle. A sustained move above the 20-DMA could improve the bullish bias.
Photo Credit: Dalal Street Investment Journal
Nifty Support Levels to Watch on Wednesday
On the downside, 23,380 remains an important support level. If the index slips below this zone, the open-equals-low level of 23,229 will become the next key level to watch.
Indicators Show Early Signs of Recovery
The 14-period daily RSI bounced from the support zone near 40, which is a positive sign. However, the MACD remains below its signal line, indicating that momentum has not yet fully shifted in favour of the bulls.
On the hourly chart, the RSI recovered from oversold territory, while the MACD generated a bullish signal from the lower zone. Even so, the Nifty is still trading below the moving average ribbon on the hourly timeframe.
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Nifty Outlook for Wednesday: Follow-Up Buying Holds the Key
The market stance should remain neutral as long as the Nifty trades below the 20-DMA. Wednesday's session will be important, as it will show whether Tuesday's recovery attracts follow-up buying and helps the index reclaim the 50-DMA, or whether the rebound was mainly a short-covering move amid the weekly expiry.
Stock to Watch: Datamatics Global Services
Datamatics Global Services has witnessed a breakout from a nearly one-month cup-like pattern. The breakout was supported by a sizeable bullish candle, with the stock closing in the upper quartile of the day's range. More importantly, the move came with strong volume participation.
Photo Credit: Dalal Street Investment Journal
The total traded volume on the NSE stood at 3.72 lakh shares, which is more than twice its 30-day average volume of 1.46 lakh shares. This indicates strong buying interest behind the breakout.
The stock is currently trading above all its key moving averages, including the 20-DMA, 50-DMA, 100-DMA and 200-DMA, suggesting a positive trend structure. The 14-period daily RSI has moved above the 60 mark and continues to rise, indicating improving momentum. In addition, the daily MACD has generated a bullish crossover, further supporting the positive setup.
Overall, the stock sustaining above the Rs 838 to Rs 840 zone would be positive. On the upside, it may test the Rs 890 to Rs 920 levels, while a stop loss can be placed near Rs 767.
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