On Tuesday, the Nifty 50 extended its losing streak to the sixth consecutive session, closing at the day's low of 24,154.90, down 132.75 points or 0.55%. Market breadth remained weak, with nearly 80% of the index constituents ending the session in the red.
The day's price action formed a red bodied candle with an upper shadow, while the close near the session low reflected continued selling pressure. The index also maintained its sequence of lower highs and lower lows. From the August 3 high of 24,774, the Nifty has now corrected by more than 600 points and slipped below the 50% retracement level of the previous upswing. It is currently trading just 0.13% above its 50 DMA.
Crucial Support Zone Comes Into Focus
The key support zone is placed between 23,960 and 24,137, where several technical levels converge. This region includes the July 29 gap area, the 61.8% retracement level of the previous upswing, the 50 DMA and the rising trendline drawn from the April 2 low.
On the upside, the index needs to break its ongoing lower high and lower low structure to indicate a reversal in the current counter trend correction. A sustained move above 24,270 would be the first sign of improvement, while the next resistance is placed near 24,370.
Momentum Indicators Remain Weak
The 14 period daily RSI has slipped below 45, indicating weakening momentum. At the same time, the MACD histogram continues to expand on the negative side, reflecting a further build up in bearish momentum.
Overall, the Nifty is approaching an important support zone. A failure to hold the 23,960 to 24,137 region could increase downside pressure and open the possibility of a move towards 23,700 over the medium term.
Stock to Watch: L&T Finance
L&T Finance has broken out of a symmetrical triangle on strong volumes, with Tuesday's higher volume supporting the breakout. The stock is also trading near the prior pivot of its 7-week flat base and remains less than 4% below its all time high. Its Relative Strength line is close to a new high, indicating continued strength compared with the broader market.
The technical setup remains positive, with both short and long term moving averages trending upwards. The Bollinger Bands have started to expand, while the moving average ribbon continues to signal an uptrend. The MACD has generated a fresh bullish signal, and the 14 period daily RSI has moved into bullish territory. The Elder Impulse System has also formed a strong bullish bar.
Overall, the stock has confirmed a triangle breakout and is now trading near its previous pivot. A sustained move above Rs 325 could take it towards Rs 340, with a stop loss at Rs 305. Above Rs 340, the next level to watch is Rs 356.
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