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The Nifty 50's recent performance suggests a potential shift in market sentiment. After a period of strong upward movement, the index has encountered resistance and is now showing signs of consolidation, with a possible negative bias. The article highlights key technical indicators and support/resistance levels that traders and investors should monitor closely. The Nifty 50 extended its downtrend for another session, closing with moderate losses on July 3rd but remaining within the previous day's trading range. The index defended the 25,400 level on a closing basis, which is a crucial short-term support. However, the Relative Strength Index (RSI) dropping below the 60 mark, settling at 59.74, signals a weakening of momentum. The RSI is on the verge of a negative crossover, further reinforcing this indication. The Stochastic RSI also remained in a negative crossover, adding to the bearish signals. However, it is noted that the India VIX, a measure of market volatility often referred to as the 'fear gauge,' continued to remain favourable for bulls, which could potentially offer some counter-balance to the bearish signals. This conflicting information suggests that the market is at an inflection point, and traders should proceed with caution. A key level to watch is 25,400; failure to defend this level could lead to further downside towards the 25,300–25,250 zone. Conversely, if the index rebounds from current levels, the 25,500–25,600 range will likely act as immediate resistance. These levels are derived from technical analysis and represent areas where buying or selling pressure is expected to be concentrated. The article also mentions intraday volatility, with the Nifty 50 initially gaining strength and touching an intraday high of 25,588 before losing all gains in the final hour and closing at 25,405, down 48 points. This price action formed a bearish candle with an upper shadow on the daily chart, suggesting that sellers were dominant during the later part of the trading session. Technically, this price action indicates the continuation of a consolidation phase or a minor dip, potentially offering a "sell on rise" opportunity for traders. However, it is important to note that the longer-term bullish chart pattern of higher tops and higher bottoms remains intact on the daily chart, and the present weakness could be a part of a new higher bottom formation at lower levels. This suggests that the current weakness might be a temporary pullback within a broader uptrend.
Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, highlights the importance of the 25,350–25,250 level, describing it as an 'important cluster support'. This zone includes the 10-day EMA (Exponential Moving Average), an ascending trendline on the daily chart, and a support zone based on a change in polarity on the weekly chart. He anticipates a sharp bounce-back from this zone. He places immediate resistance at the 25,600 level. These observations highlight the importance of multiple technical indicators converging to form a strong support or resistance area. Weekly options data suggests that the Nifty 50 is expected to remain in the 25,000–25,600 range in the near term. This information is derived from analyzing the open interest (OI) data for various call and put options. The Call side shows maximum open interest at the 25,500 strike, followed by the 26,000 and 25,600 strikes. Maximum Call writing was also seen at the 25,500 strike, followed by the 26,000 and 25,900 strikes. This suggests that option traders are expecting resistance around these levels. On the Put side, the 25,000 strike holds the maximum open interest, followed by the 25,500 and 25,400 strikes. Maximum Put writing is observed at these same levels. This indicates that option traders are expecting support around these levels. Analyzing both Call and Put OI data provides a range estimate for the Nifty 50 in the near term. The article also provides an outlook for the Bank Nifty, which also remained under pressure and continued to underperform the benchmark Nifty 50, falling 207 points to close at 56,792. It formed a bearish candle with a minor upper shadow on the daily chart and slipped below the 10-day EMA (56,850). The daily RSI dropped below the 60 mark and has already given a bearish crossover, indicating limited upside potential in the near term. Sudeep Shah, Deputy Vice President and Head of Technical and Derivative Research at SBI Securities, suggests that the zone of 56,550–56,500 will act as immediate support for the index. A sustained move below 56,500 may lead to further correction up to 56,000. On the upside, the 57,100–57,200 zone will act as a crucial hurdle.
He highlights the importance of closely monitoring the Bank Nifty's performance relative to the Nifty 50, as underperformance in the banking sector can often weigh on the overall market. The India VIX, the fear gauge, remained favourable for bulls, falling 0.48 percent to 12.39 and continuing to sustain below all key moving averages. This indicates that market participants are not overly concerned about a significant market correction, despite the bearish signals from the Nifty 50 and Bank Nifty. However, it is important to remember that the VIX is a lagging indicator and may not always accurately predict future market movements. The article concludes with a disclaimer, emphasizing that the views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions. This disclaimer is crucial to protect both the website and its users from potential liability arising from investment recommendations. The article provides a comprehensive technical analysis of the Nifty 50 and Bank Nifty, highlighting key support and resistance levels, momentum indicators, and options data. While the article suggests a potential consolidation phase with a negative bias for the Nifty 50, it also acknowledges the possibility of a bounce-back from key support levels. Traders and investors should carefully consider all the information presented in the article before making any investment decisions. The article also underscores the importance of risk management and consulting with certified financial advisors before investing in the stock market. Furthermore, the importance of the India VIX, and understanding its influence on the market is crucial. However, the reader must understand that VIX is not always an accurate market predictor. Combining multiple technical indicators, and consulting with experts is imperative before making any investment decisions. The expert opinions, coupled with technical analysis, is a complete tool for someone to have a sound investment strategy, however, the reader should understand, that past performances are no guarantee of future returns.