Tech View: Nifty breaks below 50 DEMA, forming bear candle. How to trade on Monday

The Nifty witnessed an extremely volatile day of trading on Friday, saw sharp swings in both directions and closed in the red, hovering just above the 25k mark, but falling slightly below the 50 DEMA.

The index fell 1,310 points (-5.2%) after making a new high of 26,277 last week.

A bearish candle was formed on the daily as well as the weekly chart. Nifty’s near-term uptrend has declined sharply. After placing at support around 25,000, a slight upside bounce is expected in the opening week, which is expected to be an opportunity for selling. A decisive move below the 25,000-24,950 levels could open the next downside towards 24,500 in the near term. HDFC Securities’ Nagaraj Shetty said immediate resistance would be seen around 25,300.

In open interest (OI) data, the highest OI was seen at 25,200 and 25,300 strike prices on the call side, while on the put side, the highest OI was seen at the 25,000 strike price.

What should traders do? Here’s what analysts had to say:

Jatin Gedia, Sher Khan

On the daily chart, we can observe that the Nifty has been falling for the last five trading sessions and has improved nearly 1,200 points to a high of 26,277. It is now approaching the support zone of 25,000 – 24,800, which coincides with the 50-day moving average and the 61.82% Fibonacci retracement level of the August-September rally. We expect Nifty to hold this support and counter trend pullback as the hourly momentum setup has a positive divergence indicating loss of momentum on the downside. An upside pullback towards 25,500 is likely.

Rupak De, LKP Securities

The Nifty witnessed a bear attack for the second day in a row. A correction towards 25,000 was triggered by sustained trading below key levels. Sentiment has become extremely weak, with highs being used as sell zones. At the lower end, the next support is seen at 24,750, while at the higher end, resistance is seen at 25,300.

Rajesh Bhosale, Angel One

The market has broken below the trendline connecting the highs and lows of the past two months, confirming a channel breakdown. This is one of the sharpest weekly drops in recent times, with prices closing at the key 50 EMA support, creating a strong bearish candlestick on the weekly chart, signaling further potential losses ahead. The next key support is the September swing low around 24,750 and then 24,500. However, traders should be cautious with short positions, as some bounces in between cannot be ruled out due to oversold conditions in the momentum indicators on the intra-day chart. On the upside, Friday’s high near 25,500, which coincides with the 20 EMA and channel breakdown level, will act as a tough resistance, with immediate resistance before 25,300.

Praveen Dwarkanath, Hedged.in

The Nifty, earlier in the day, again fell nearly 2% from the day’s peak after the dead cat bounce. However, it is taking support at the 25,000 level. Another bounce back to current levels may also appear to be short-lived. The Nifty has closed below the upper band of the Keltner channel, which is a strong indication of further declines. All momentum indicators are in oversold territory, which could be a possible reason for the short rally that is expected in the short term. Data from options writers showed a significant increase in call writing and ITM also placed short covering, suggesting weakness in the index to continue.

(Disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. These do not represent the views of Economic Times)