Technical View | Nifty closes at 3-month low, 17,550 crucial for upside

The 200-day exponential moving average (17,550) and January 27 low of 17,494) are the two levels to watch, though a minor pullback rally can't be ruled out after the bloodbath, say experts

The index opened lower at 17,877 and extended losses to drop to the day’s low of 17,494. It narrowed losses in the late trade and ended 288 points, or 1.61 percent, down at 17,604, its worst closing since October 21, 2022.

Experts said the 200-day exponential moving average (DEMA) at 17,550 and the day’s low of 17,494 would be the levels to watch, though a minor pullback rally can't be ruled out.

If two levels are broken decisively, all eyes will then be on the long support trend line adjoining the lows of March 2020 and June 2022 or the 200 DMA (around 17,300), they said.

"A minor pullback rally is possible if the index trades above 17,650. On the flip side, selling pressure is likely to accelerate only after the dismissal of 17,550 and below the same the index could slip till 17,400," Amol Athawale, Deputy Vice President - Technical Research at Kotak Securities.

An extended correction can drag the index to the 200-day simple moving average (SMA) or 17,300.

On the Options front, the weekly maximum Call open interest was at 18,000 strike, which is expected to be the crucial resistance for the coming sessions, followed by 18,200 strike, with Call writing at 18,000 strike, then 17,800 strike.

On the Put side, the maximum open interest was at 17,000 strike, which can be the support, followed by 18,000 strike and 17,100 strike, with writing at 17,000 and 17,100 strikes.

The Nifty is expected to trade in 17,000-18,000 range in the coming session.

The volatility climbed above all important long-term moving averages (50, 100 and 200 DEMA) to 18 as well during the day. India VIX, the fear index, surged 18.18 percent to 17.32 level.

Banking blues

The correction has largely been attributed to banks. The Bank Nifty opened lower at 41,382 and dropped to the day's low of 40,149. Hence, 40,000 is expected to act as a crucial level for the further downside, experts said.

The index formed a long bearish candle on the daily as well as weekly charts, falling 3.13 percent or 1,302 to 40,345. It was down 5 percent for the week.

" …the index has sustained below the crucial moving average 50 EMA (42,280). The RSI (relative strength index) is in bearish crossover and falling," Kunal Shah, Senior Technical Analyst at LKP Securities, said.

In the short term, the index may remain under selling pressure. Support is visible at 40,000, while on the higher end, resistance at 40,800, the expert said.

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