During the previous week, the Nifty 50 index started on a weak note and ended the week under pressure. The index attempted a recovery on Wednesday and Thursday and formed a Morning Star pattern. However, the reversal failed to attract follow through buying as sellers once again became active at higher levels.
As a result, the index moved in a wide range of 735 points during the week and finally settled lower by 532.65 points, or 2.20%, at 23,643.50. With this decline, the Nifty 50 snapped its two-week winning streak.
India VIX Rises as Market Nervousness Increases
Volatility picked up during the week, with India VIX rising 11.58% to 18.79, signaling increased caution among market participants. Sentiment remained under pressure as firm crude oil prices and the rupee's fall to a new all-time low beyond 96 against the US dollar added to market concerns.
Sectoral Performance: Pharma and Metal Buck the Trend
Most key sectoral indices ended the week in the red. However, Nifty Pharma and Nifty Metal stood out with gains of 2.18% and 1.91%, respectively.
One positive takeaway was the return of FIIs as net buyers in the final two trading sessions of the week. However, on a weekly basis, they still remained net sellers to the tune of over ₹13,000 crore.
Nifty's Friday Trading Action: Nifty Fails Near 50 DMA
On Friday, the Nifty 50 index opened higher and moved above the 23,800 mark during the session. However, profit booking emerged near the 50-DMA and the index gave up about 198 points from the day's high.
The index eventually ended lower by 46.10 points, or 0.19%. It formed a bearish-bodied candle with an upper shadow, indicating sellers retained control at higher levels.
Nifty 50 Resistance Zone for May 18: 23,830 to 23,860 Remains Crucial
From a technical perspective, the Nifty 50 remains in a vulnerable setup after failing to sustain above the crucial resistance zone of 23,830 to 23,860. This zone is acting as resistance as it is defined by a horizontal trendline.
The May 11 gap area and the 50-DMA are also placed around this level, making it a stiff resistance band for the index.
Nifty 50 Support Zone: Key Levels to Watch
The broader structure suggests that the index is currently trapped in a wide consolidation to corrective phase. On the downside, the lower end of the broader range is placed around 22,100.
Interestingly, the 200-week moving average is also placed near this zone at around 21,990, making it an important long term structural support.
For Monday, May 18, the 23,450 to 23,550 zone is likely to act as immediate support for the Nifty 50, followed by last week's low of 23,262.45. A decisive break below this level could invite fresh selling pressure. In that case, the index may look to completely fill the April 8 gap area, whose lower end is placed at 23,153.85.
Nifty 50 Upside Levels: Strength Only Above 23,860
On the upside, the index needs to sustain above 23,860 to regain strength. A move above this level could open the door for a test of the 24,000 to 24,070 zone, where the 20 DMA is currently placed.
RSI and MACD Indicate Weak Momentum
The weekly 14 period RSI, after forming a double top like pattern, has slipped below the neckline of the formation. It currently stands at 41.46 and remains below the neutral 50 mark, indicating weakening momentum.
The weekly MACD also remains below its signal line and continues to stay in negative territory, reflecting a weak underlying trend.
How Should Traders Approach the Coming Week?
Given the current technical setup, market participants may prefer to remain cautious and selective. Fresh aggressive buying may be avoided until the index shows clear signs of strength above the immediate resistance zone. Sustained movement above 23,860 will be important for any meaningful recovery, while a break below 23,262.45 could deepen the corrective pressure.
EMS Stock in Focus: Avalon Technologies
Avalon Technologies Limited is among India's leading fully integrated Electronic Manufacturing Services (EMS) companies, with end-to-end capabilities in delivering box-build solutions. The company focuses on high-value, precision-engineered products, which places it well within the growing EMS opportunity in India.
From a technical perspective, the Avalon Technologies stock witnessed a breakout from a 31-week cup-like formation on the weekly chart. The breakout was supported by strong volumes of 83.87 lakh shares, which is more than six times its 30-week average volume of 12.41 lakh shares per week. However, the stock did not see immediate follow-through buying after the breakout. This is understandable, as the breakout candle itself was quite large, with the stock gaining nearly 31% in a single week. The subsequent price action, therefore, appears more like consolidation after a sharp move rather than a sign of weakness.
Weekly Chart
On the daily chart, the stock continues to trade above its key moving averages, and these averages are aligned in a bullish sequence. After the recent correction from higher levels, Avalon Technologies has formed a tweezer bottom-like candlestick pattern. A tweezer bottom is a two-candle reversal pattern where the lows of both candles are nearly identical. In this case, the second candle also saw an uptick in volume and a higher close, which strengthens the positive setup.
Daily Chart
Momentum indicators are also supportive. The 14-period daily RSI remains in a strong bullish trajectory, while the weekly RSI is placed above the 60 mark, indicating sustained strength. The MACD line is trading above both the signal line and the zero line, which further supports the positive momentum.
Overall, the stock appears to be regaining strength after a brief consolidation phase. Sustaining above the Rs 1,330 to Rs 1,335 zone would keep the setup positive. On the upside, the stock may test Rs 1,390 to Rs 1,435 levels, while a stop loss can be placed around Rs 1,260.
Also Read: Your Rs 10 Products Are Quietly Getting Smaller
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