The Nifty 50 index opened with a gap-down on Thursday but recovered steadily during the early and middle part of the session. However, the recovery lost steam in afternoon trade, and the index once again came under pressure in the later part of the day. From the day's high, the Nifty trimmed nearly 165 points and closed at 23,161.60, down 53.35 points or 0.23%.
Long Upper Shadow Candlestick Formation
Thursday's price action formed a small-bodied candle with a long upper shadow. This was the third such formation in the last four sessions, showing that even minor rebounds are facing selling pressure at higher levels. The 8-EMA once again acted as resistance, keeping the short-term trend under pressure.
Index Stuck in a Narrow Retracement Zone
For the last seven sessions, the Nifty has been moving between the 50% and 61.8% levels of the previous up-move from the April 2 low to the April 21 high. This range-bound movement reflects indecision, but the repeated failure to sustain at higher levels keeps the overall bias weak.
The index has also failed to close above the previous day's high for 12 consecutive sessions. This shows a clear lack of follow-through on the upside. The broader trading range remains capped between 23,070 and 23,560.
Weekly Structure Shows Lack of Strength
On Thursday, the index almost tested the June 8 low and closed below the previous day's low. It is now trading near the previous week's low. More importantly, the Nifty has failed to close above the previous week's high for eight straight weeks, highlighting continued weakness in the broader structure.
Volumes declined further and remained below average for the seventh consecutive session. The 14-period daily RSI has moved down from its change-in-polarity zone and slipped below the 38 mark. The MACD remains below the zero line, while the MACD line continues to fall, indicating that bearish momentum is still active.
Key Support and Resistance Levels for Nifty
For now, the 23,000-23,100 zone remains the key support area on a closing basis. This zone has been tested multiple times in the last four sessions, but the index has not broken it decisively on a closing basis. This also underlines the importance of the 61.8% retracement level.
A close below 23,000 would confirm an extension of the downtrend and may open the way towards 22,800 and 22,700. On the upside, the index needs to close above 23,304 and 23,542, which are the 8-EMA and 20-DMA levels, respectively, to show early signs of strength.
For a meaningful trend reversal, the Nifty must first form a higher low and then a higher high. Until that structure appears, the market setup remains weak, and traders should continue to maintain a negative bias.
Stock to Watch: Allied Blenders & Distillers Ltd
Allied Blenders & Distillers Ltd has witnessed a breakout from a six-month cup-and-handle-like formation. While the structure is not a textbook pattern, it does resemble one and signals improving price strength.
The breakout was supported by a wide-range bullish candle and strong volumes, which adds credibility to the move. Total traded volume on the NSE stood at 13.06 lakh shares, nearly four times higher than the 30-day average volume of 3.43 lakh shares per day. This indicates higher market participation in the direction of the prevailing trend.
The stock is trading above all its key moving averages, which confirms a positive price structure. Momentum indicators are also supportive. The 14-period daily RSI has moved above the 60 mark after taking support near its nine-period average, strengthening the bullish bias. The MACD has also generated a fresh bullish crossover, suggesting renewed momentum.
Considering these factors, if the stock sustains above the Rs 612-615 zone, it may open the way for a further upmove towards Rs 674-695. A stop loss can be maintained at Rs 553.
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