The Nifty index continues to maintain its bullish short-term outlook, despite some profit booking that has hindered further upside. While the overall trend remains positive, traders should watch for critical levels in the near term, particularly the strong resistance at 24,350, which may prevent the index from breaking higher unless there is a decisive breakout.
Resistance at 24,350: Key Technical Levels to Watch
As per recent technical analysis, 24,350 stands out as a strong resistance level for Nifty in the short term. According to candlestick patterns, this level is a key barrier, and unless Nifty convincingly breaks through this point, further upward movement may be limited. On the downside, immediate support for the index lies around 24,070, where the 21-Day Exponential Moving Average (DEMA) is located. Should the index breach this level, psychological support around 24,000 could offer additional cushion for the bulls.
Despite the short-term bullish trend, Hrishikesh Yedve of Asit C Mehta Investment Intermediates advises traders to stay cautious. If the index continues to trade below the 24,350 resistance, it may be prudent for traders to book profits and wait for confirmation of a breakout before re-entering the market.
Profit Booking Leads to Negative Close
Nifty started the day with a gap up, signaling strong initial buying interest. However, this optimism was short-lived as profit booking took center stage, pushing the index to close at 24,195, marking a negative day. This pullback highlights that market sentiment remains cautious, and investors are taking profits after recent gains. In contrast, the Nifty Smallcap 100 index outperformed the main index, rising by 0.82%, indicating that smaller stocks may still have room for growth despite the market’s pause.
Bearish Belt Hold Pattern Signals Caution
On the daily chart, Nifty has formed a bearish belt hold pattern, which is often interpreted as a sign of weakness. This pattern indicates that sellers are starting to take control, and the index could face further downside if it fails to surpass the resistance at 24,350. While the overall trend remains bullish, traders should be prepared for potential volatility and look for more clarity before making any aggressive moves.
Open Interest (OI) Data Highlights Market Sentiment
An analysis of open interest data shows that the highest OI on the call side is concentrated around the 24,200 and 24,250 strike prices. This suggests that there is significant resistance near these levels, with traders likely betting on Nifty failing to push beyond 24,250 in the near term. On the put side, the highest OI is observed at the 22,200 strike price, followed by 24,150, implying strong support at these levels.
The concentration of OI around the 24,150 level suggests that there is significant buying interest here, and the market may find some stability should the index dip toward this level. However, a break below 24,070 or 24,000 could signal a shift in market sentiment, leading to further downside.
What Traders Should Focus On
For now, the short-term outlook remains constructive, but traders should remain cautious and monitor the resistance at 24,350 closely. If Nifty fails to break above this level, a period of consolidation or a pullback to lower support levels may occur. The immediate support zones at 24,070 and 24,000 should be watched carefully, as a failure to hold these levels could suggest a deeper correction.
Conclusion: Proceed with Caution, Book Profits
In conclusion, while the Nifty index is still on a bullish trajectory in the short term, traders should be mindful of the resistance at 24,350 and the bearish candlestick formation observed on the charts. Given the potential for a pullback or consolidation, it may be wise for traders to book profits and wait for a breakout above 24,350 before taking fresh positions. Key support at 24,070 and 24,000 will be crucial in determining whether the bulls can regain control or if the bears will take charge. Keeping a close eye on both the technical indicators and the open interest data will be essential for traders looking to navigate the current market environment.
As always, a disciplined approach and risk management are key to succeeding in these volatile market conditions.
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