Stock market outlook: What's working in favour of the bulls and bears?

Here are three key factors that are working in favour of the bulls and bears and could dictate the market trend going ahead as per the technical charts.

Since the start of the calendar year 2024, the Nifty 50 has witnessed intermediate corrections, even as the NSE benchmark scaled life-time highs on multiple occasions owing to valuation concerns and uncertainty over the likely timing on US interest rate cuts.

Arguably, intermediate corrections in a rising market are said to be healthy for the long-run. However, such behaviour can leave both bulls and bears in a tizzy.

On March 13, the Nifty 50 broke below its 20-DMA (Daily Moving Average) for the fourth time in less than two months. The first time index broke below this short-term moving average was on January 17. Further, this time around, the NSE benchmark also fell below its 50-DMA for the first-time since November 15, 2023.

However, on Thursday, the Nifty bounced back above its 50-DMA which now stands at 21,940, and in the process signaled that the index may rise further to test its 20-DMA, which stands at 22,160 in the near-term.

Given the brief pullback, is the worst over for the markets for now?

As per the technical charts, here's what working in favour of the bulls and bears at the current juncture for the Nifty.

Factors in favour of the bulls

1. The bias for the Nifty, based on the price-to-moving averages action remains positive, with the shorter-term moving averages seen holding firmly above the longer-term moving averages.

2. On the weekly scale, the Nifty has successfully managed to sustain above its 20-WMA (Weekly Moving Average) since mid-November 2023. In fact, the long-term chart shows that that Nifty has broadly survived above the 20-WMA since April 2023, barring the 3-week price correction seen in October - November period. The 20-WMA for the Nifty presently stands at 21,400.

3. The DI (Directional Index) on the daily scale suggests lack of strength of either bulls or bears at current juncture, thus suggesting 'wait-and-watch' strategy as the preferred choice for now.

Factors in favour of the bears

1. The key momentum oscillators such the RSI (Relative Strength Index) and the MACD (Moving Average Convergence-Divergence) have turned negative both on the daily and weekly scales.

2. The Nifty is currently seen below the key bullish pivot at 22,300 on the monthly scale. A close below the same, could suggest likely consolidation going ahead.

3. The RSI is seen converging on the monthly scale, suggesting that the markets shall face difficulty in sustaining at higher levels.

Key Levels to watch out

As such, the 50-DMA 21,940 is the key support for the near-term, below the index may seek support around the lower-end of the anticipated trading band at 21,750-odd levels. On the downside, the Nifty could slide to 21,400 - 21,270 levels in the near-term. Further slide towards 20,800 also seems likely.

On the other hand, in case, the Nifty is able to hold above the 50-DMA, the index will need to bounce back and sustain above the 20-DMA on a consistent basis, in order to reverse the possible negativities. Having said that, the upside for the Nifty for now seem capped around 22,575 levels.