Nifty At 20-DMA Support: Should You Buy The Dip?

The Nifty 50 index opened lower on Wednesday, slipping below the 25,100 mark. However, the early weakness was swiftly met with buying interest, allowing the index to quickly move towards the 25,200 level. Despite this recovery, the overhang of Tuesday's bearish reversal candlestick pattern weighed on sentiment, preventing the bulls from sustaining momentum. As a result, the index surrendered most of its intraday gains and ended its four-day winning streak. Nevertheless, it managed to defend the key psychological level of 25,000 at the close.

On the daily chart, the benchmark formed a small-bodied bearish candle with a long upper shadow, indicating selling pressure at higher levels. The pattern also reflected a lower high and a lower low compared to the previous session. Moreover, the Nifty closed below the prior day's low, thereby confirming the bearish implications of the earlier ‘Shooting Star' formation, even though trading volumes were lower. Interestingly, the index managed to close precisely around its 20-day moving average (20-DMA) support, which it had briefly breached during the day. The appearance of a second consecutive Shooting Star-like pattern signals possible exhaustion of the recent uptrend.

From an indicator perspective, the 14-period daily RSI has slipped below the 55 mark, while the MACD and Signal lines are running parallel. Despite a sharp 600-point rally from the September 30 low, the RSI failed to cross 60, and the MACD line, though hovering above the zero line, did not trigger a positive crossover. Together, these signals suggest that the recent rally was merely a relief rally, rather than the beginning of a sustained uptrend. On the hourly chart as well, the index formed lower lows despite attempts to recover intraday, reinforcing near-term weakness. On the hourly chart as well, the index formed lower lows despite attempts to recover intraday, exhaustion after the recent uptrend.

Looking ahead, the focus now shifts to the Q2FY26 earnings season, with IT major Tata Consultancy Services (TCS) set to kick it off on Oct. 9, 2025. Although expectations remain subdued, any positive surprise, similar to the post-RBI MPC outcome reaction could lift market sentiment. Technically, any up-move is likely to face resistance in the 25,190–25,220 zone. A decisive close above 25,220 would negate the bearish implications of the Shooting Star pattern. In such a case, it could open the doors for a rally towards the 25,500–25,550 zone in the short to near term. Conversely, sustained trade below the 20-DMA at 25,033 could invite further correction towards 24,842, where the 50-DMA is placed.

In summary, after a strong 600-point rebound from the September 30 lows, the bulls appear fatigued. Hence, traders should avoid aggressive long positions for now and closely monitor Q2FY26 earnings announcements, which are expected to set the tone for the market in the near term.

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Disclaimer: The views shared by investment advisers on NDTV Profit are their own. They do not reflect the views of NDTV Profit. Viewers should consult a financial adviser before making investment decisions.