Nifty Forms Bearish Engulfing Near Swing High — Can 20-DMA Support Hold?
The Nifty closed below the previous two sessions’ lows and also breached a key support level at 25,152.
On Nifty’s weekly expiry day, the session began on a positive note, with the index swiftly moving above the 25,300 mark. However, it failed to surpass last week’s high of 25,331. Soon after, selling pressure emerged, dragging the index below the previous two sessions’ lows. As the day progressed, the intensity of selling increased, pushing Nifty to an intraday low of 25,060 near the 20-day moving average (DMA). Although the index found temporary support at this level and staged a mild recovery, it eventually settled with a loss of 0.32% at 25,145.50.
The Nifty closed below the previous two sessions’ lows and also breached a key support level at 25,152. Notably, it ended below the crucial resistance of 25,220 a level that had witnessed a decisive breakout on Monday. The index also registered a fresh distribution day as trading volumes were significantly higher than the previous session, accompanying the 0.32% decline. A large bearish candle resembling a bearish engulfing pattern was formed, with a daily range of nearly 250 points, well above the 10-day average. This development was in line with earlier expectations highlighted in prior analysis.
Interestingly, the bearish candle emerged near a confluence of swing highs a region where similar patterns have appeared on at least two past occasions. With the index retracing from the symmetrical triangle’s resistance and failing to close above the previous day’s high for two consecutive sessions, long positions should be approached with caution. Furthermore, the close below the prior day’s low, coupled with higher volume, reinforces a weak undertone.
The Nifty has also faced resistance at the 78.6% Fibonacci retracement level of the downswing. For now, it has taken intraday support at the 8-EMA and 20-DMA. A close below the 20-DMA (25,067) and Tuesday’s low of 25,060 would confirm a bearish reversal. In such a case, the next meaningful support lies near the 50-DMA at 24,871. The 14-period RSI has retreated to 55, while the declining MACD histogram indicates waning momentum.
Overall, Tuesday’s high-volume decline has raised concerns over the sustainability of the recent bullish structure. To resume the uptrend, Nifty must decisively close above the 25,220–25,400 resistance zone with strong volume confirmation. Traders should also keep an eye on India VIX, a move above the 12–13 range could signal increasing volatility and further downside risk for the ongoing uptrend.
The above sponsored content is non-editorial and has been sourced from a third party. NDTV does not guarantee, vouch for or necessarily endorse any of the above content, nor is responsible for it in any manner whatsoever.
