The Nifty 50 slipped below 24,500 on Tuesday as higher crude oil prices weighed on sentiment, but the index recovered from its intraday low and closed at 24,471.70. The decline came after the benchmark had gained 1,168 points, or 4.95%, in six trading sessions, leaving the index in a short-term consolidation phase.
The Nifty fell to an intraday low of 24,429, near its Aug. 4 low, before buying at lower levels helped limit the decline. The index ended 0.46% lower.
The current price structure resembles a flag formation, with the 20-day moving average, or 20-DMA, at 24,287 emerging as a key level. Holding this support would keep the broader recovery structure intact, while a decisive break below it could signal that the recent improvement in momentum is fading.
Nifty Forms Bearish Candle After Sharp Rally
Tuesday's session produced a bearish candle, with the Nifty closing below its eight-day exponential moving average, or EMA. The index also moved below the 23.6% retracement level of the previous upswing from the July 24 low to the Aug. 3 high.
However, the decline followed a sharp six-session rally. Some consolidation after such a move can allow the market to absorb recent gains before its next directional move.
The first key support is at 24,328, which represents the 38.2% retracement of the recent rally. If selling pressure continues, the index could move towards its 20-DMA at 24,287. The next support is around 24,190, corresponding to the 50% retracement level.
The 20-DMA assumes added importance because the current setup resembles a flag formation. As long as the Nifty holds this support zone, the broader bullish structure remains intact.
Nifty Needs To Reclaim 24,576 For Uptrend To Resume
For the Nifty to regain upward momentum, it needs to move back above its eight-day EMA at 24,506 and then cross Tuesday's high of 24,576.
A sustained move above Tuesday's high would strengthen the possibility of a breakout from the developing flag-and-pole pattern and could signal a resumption of the broader uptrend.
Until that confirmation emerges, the index remains in a short-term consolidation phase.
Momentum indicators have also weakened following the recent rally. The 14-period Relative Strength Index, or RSI, has slipped below 60, pointing to a moderation in bullish momentum. The MACD histogram has also contracted sharply, indicating that the strength behind the recent advance has weakened.
The 20-DMA at 24,287 is therefore the key level to watch. A decisive break below this average would be an early indication that the momentum regained during the recent rally is starting to fade. If the Nifty continues to hold above this zone, the current decline can still be viewed as consolidation within the broader recovery trend.
Zydus Lifesciences Breaks Out Of Five-Week Base
Zydus Lifesciences has broken out of a five-week base after finding support near its 10-week moving average and rebounding sharply. The breakout came with strong volumes, supporting the move.
The stock's Relative Strength line has reached a new high, indicating that it has outperformed the broader market. Its short- and long-term moving averages are also trending higher.
The moving average ribbon continues to point upwards, while the Bollinger Bands have started expanding, indicating increased momentum and volatility.
Momentum indicators also support the breakout. The daily MACD has generated a bullish crossover, while the RSI has moved back into the bullish zone. The KST is close to generating a bullish signal and the Stochastic RSI remains positive. The Elder Impulse System has also produced a strong bullish bar.
The stock has therefore confirmed a breakout from its recent consolidation. A sustained move above Rs 1,200 could keep momentum positive and open the way towards Rs 1,285. A sustained move above Rs 1,285 could take the stock towards Rs 1,340.
The stop loss can be maintained at Rs 1,112.
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