The Nifty 50 closed at its lowest level in nearly three weeks on Monday after selling pressure intensified through the session, pushing the benchmark below 23,400 and raising concerns over a deeper correction ahead of weekly expiry.
The index ended 0.70% lower at 23,382.60 after briefly moving above its 50-day moving average early in trade. Market breadth remained weak, with nearly four declining stocks for every advancing stock.
The benchmark is now approaching a critical support zone at 23,263, a level that could determine whether the market sees a short-covering bounce or a fresh leg lower.
Weekly Expiry Focus
Monday's decline extended the weakness seen after Nifty broke down from a bearish flag-like pattern in the previous session. The index formed a bearish candle with a lower high and lower low, indicating that sellers remained active.
Nifty continues to trade below key moving averages, while Bollinger Bands are trending lower and widening. These signals suggest downside momentum remains intact.
The index is nearing the lower end of its 15-session trading range between 23,263 and 24,090. A close below 23,263 would confirm a breakdown from that range and could open the way for a move towards 22,436, based on the measured target from the pattern.
Bounce Possible, But Resistance Remains
Despite the weak setup, a short-covering rally cannot be ruled out if Nifty holds above 23,263.
The first resistance is placed near the 50-day moving average at around 23,687. A stronger recovery would require the index to sustain above the 20-day moving average near 23,800.
Until then, any rebound may face selling pressure at higher levels.
Momentum Signals Stay Weak
Momentum indicators continue to favour caution.
The daily MACD has generated a fresh bearish signal, while the 14-period daily Relative Strength Index remains near the 40 level, an important support zone for momentum.
On the hourly chart, the RSI has entered oversold territory and is approaching its previous swing low. This suggests the market may be stretched on the downside in the near term.
With weekly expiry approaching, traders are likely to focus on the 23,263 level. Holding above that support could trigger short covering, while a break below it may strengthen the bearish outlook.
Stock To Watch: Tech Mahindra
Tech Mahindra stands out after the Nifty IT index gained 2.66% on Monday, outperforming the broader market, even as the Nifty 50 fell 0.70%.
The IT index has registered a breakout from an inverted head-and-shoulders pattern on the daily chart, and Tech Mahindra has shown a similar constructive setup.
The stock has broken above the neckline of a double-bottom pattern on the daily timeframe. The move was accompanied by higher trading volumes, with activity exceeding both the 10-day and 30-day average volumes on the NSE.
Tech Mahindra also trades above its key moving averages, supporting the short-term trend.
Momentum indicators remain supportive. The MACD has delivered a positive crossover, while the 14-period daily RSI has moved above 60, indicating improving momentum.
If the stock sustains above Rs 1,548, the potential upside target lies between Rs 1,610 and Rs 1,625. A stop loss may be maintained at Rs 1,490.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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