After recovering from the recent lows in the previous session, the Nifty 50 carried positive momentum into Thursday's trade and opened higher by nearly 83 points. The gap-up opening helped the index fill the downside gap created in the previous session, with the benchmark moving up to an intraday high of 24,025.40.
However, the recovery failed to sustain as the index faced selling pressure near the 100-DMA. The inability to cross this key hurdle triggered a sharp reversal, with Nifty slipping nearly 152 points from the day's high. The index eventually ended 41 points lower, closing at the day's low.
Selling Pressure Emerges After Failed Recovery Attempt
Thursday's price action resulted in the formation of a bearish Closing Marubozu candle on the daily chart. The pattern indicates strong selling pressure, as the index closed at the lowest level of the session with minimal lower shadow.
While Nifty continues to hold above the previous parallel lows near 23,787, the recovery remains under question. The failure to sustain above the previous session's high reflects limited buying strength, particularly after the index faced resistance near the 100-DMA and the 61.8% Fibonacci retracement level of the previous upmove.
Bearish Moving Average Crossover Nears
There are some positive signs, including the formation of a higher low during the recent recovery and the index continuing to trade within the Bollinger Bands. However, these factors alone are not enough to confirm a trend reversal.
The short-term technical setup remains under pressure as the 20-DMA is close to slipping below the 50-DMA. A confirmed crossover would indicate weakening momentum and could increase the possibility of the index moving towards a fresh low below 23,606.
The 14-period RSI is trading below the 40 mark, while the MACD remains below the zero line with the histogram pointing towards increasing bearish pressure.
Nifty Key Levels: 23,786 Support, 24,025 Resistance
In the near term, Nifty needs to reclaim the 24,025-24,050 zone to improve market sentiment and revive the possibility of a short-covering move.
Beyond this range, the 24,207-24,239 area is likely to be an important resistance zone, as it is confluence of the 20-DMA and 50-DMA.
On the downside, Wednesday's low of 23,786 remains the immediate support level. A break below this zone could increase selling pressure and drag the index towards the next important support near 23,606.
Nifty's Next Move Depends on Holding Key Support
The recent price action indicates that the index is struggling to regain strength after breaking below its earlier 400-point trading range. Unless Nifty moves back above key moving averages and sustains higher levels, the near-term trend is likely to remain cautious.
The immediate focus will be on whether the index can defend the 23,786-support zone or whether further weakness pushes it towards the 23,606 level.
Stock to Watch: IDFC First Bank
IDFC First Bank has witnessed a decisive breakout from a six-week tight consolidation pattern on a closing basis. The breakout was supported by above-average volumes, indicating strong participation from buyers.
Weekly Chart
Adding further strength to the setup, the Relative Strength line has reached a new high, suggesting that the stock continues to outperform the broader market.
The overall trend remains favourable, with short-term and long-term moving averages placed in a bullish sequence and maintaining an upward trajectory. This indicates sustained strength in the stock's price structure.
Momentum indicators are also supportive. The weekly MACD continues to remain in bullish territory, while the daily MACD is nearing a bullish crossover. The weekly RSI has found support around the 60 level and is turning higher, while the daily 14-period RSI has moved into the bullish zone.
The stock has confirmed a bullish breakout and the current setup remains constructive. Sustaining above the Rs 88 level could open the door for a move towards Rs 95. A decisive breakout above Rs 95 may further strengthen momentum and push the stock towards Rs 102. Traders can maintain a stop loss at Rs 81.
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