Nifty's Jenga stack shakes, 22,000 levels could topple it completely

Tests 50-WMA - a level not breached since March 2023 - after 200-DMA fall on Friday

The National Stock Exchange (NSE) Nifty 50 Index ended below the 200-daily moving average (DMA) after a month, with the index now down 5.3 per cent, or 1,254 points, from a high of 24,792 in just five trading sessions. It closed at 23,587.50 on Friday. Recently, the short-term bias for the Nifty has also turned negative, with the NSE benchmark index drifting below its super trendline on the daily scale.

 

The daily chart also shows that the Nifty witnessed a ‘death cross’ pattern in late November. Technically, a death cross occurs when the 50-DMA of the Nifty falls below the 100-DMA, suggesting a likely tepid trend going forward.

 

Apart from that, the Nifty, which had clawed its way back above the 200-DMA, has now slipped below it. Following Friday’s sharp fall, the index has also closed below the lower end of the Bollinger Bands on the daily scale. This indicates that the near-term trend for the Nifty is likely to remain bearish as long as the index stays below the 23,750-23,825 levels. 

 

On the weekly scale, the Nifty is testing support around its 50-weekly moving average (WMA), which stands at 23,538. In November, too, the Nifty tested this key moving average but managed to sustain above it. The Nifty has not closed below its 50-WMA since March 2023, implying that the Nifty’s 21-month weekly trend is now under threat.

 

The longer-term chart suggests that the Nifty seems on course to test the 20-monthly moving average, which currently stands at 22,039. Near support for the index exists around the 23,400 and 23,350 levels. Below this, the market may exert additional selling pressure, with interim support for the Nifty seen around the 22,500-22,400 zones.

 

If the support at 23,400 holds, the Nifty could attempt a pullback towards 24,700 again.

 

In the case of the S&P BSE Sensex, near support for the BSE benchmark index is visible at the 77,475 level. Below this, the index may retest the November low of 76,802 or drift lower to the next key support at 75,875 in the near term. On the upside, a pullback to the 78,900-79,500 levels cannot be ruled out in the short term.