Introduction:
The Nifty 50 index staged a notable recovery on Wednesday, closing at 24,619.35 with a gain of 131.95 points (+0.54%). This upward move comes after a prolonged correction phase that saw the index slipping from its record highs above 25,600. Technical indicators now suggest a potential short-term trend reversal as Nifty breaks out of its recent downtrend channel and holds above key support levels. Traders and investors are closely watching the 24,780–24,800 zone, which could determine the index’s next directional move.
Nifty 50 Attempts Trend Reversal After Downtrend Breakout
“Nifty 50 daily chart showing breakout from a short-term downtrend with support near 24,456 and resistance at 24,782.”
The Nifty 50 index has been under sustained selling pressure for several weeks, forming a descending channel from its July highs. The downtrend accelerated in early August, pushing prices toward the lower Bollinger Band near 24,300. However, today’s session marked a crucial development as Nifty broke above the descending trendline resistance, suggesting that selling momentum might be waning.
Volume patterns add weight to this move. The day’s turnover crossed 236 million, reflecting increased buying interest after a long bearish stretch. The 20-day Bollinger Band midline at 24,781.95 is now the immediate resistance level to watch. If the index sustains above this zone, short covering could fuel further gains toward 25,250, where the upper resistance lies.
According to market analysts, a daily close above 24,800 could signal the start of a fresh bullish leg, while a fall back below 24,450 may negate the breakout and invite renewed selling. “This breakout needs confirmation with follow-up buying. The market has been jittery due to global macro concerns, but the underlying structure shows resilience,” said a senior technical strategist at a Mumbai-based brokerage.
Expanding on the Trend Reversal Attempt
Over the last month, the Nifty 50 has been influenced by a combination of domestic and international factors. Weak global cues from the U.S. and Asian markets, coupled with foreign institutional investor (FII) selling, dragged the index lower. The rise in U.S. bond yields and concerns over China’s economic slowdown also pressured sentiment.
From a technical standpoint, the breakdown below 25,000 in late July triggered panic selling, and the index tested 24,300 support last week. Interestingly, the support at 24,317.20 — aligning with the lower Bollinger Band — held firm, prompting a relief rally. Bollinger Bands are now showing a potential narrowing pattern, often a precursor to a sharp directional move.
The Relative Strength Index (RSI) has recovered from the oversold territory near 35 to around 46, indicating improving momentum but still not fully in bullish territory. Traders may also note that the candlestick formed today is a bullish engulfing pattern, which, in the right context, often signals trend reversal.
Historically, when Nifty has broken above a short-term downtrend with strong volume, follow-up rallies of 3–5% have been common, provided there’s no major macroeconomic shock. This makes the next two sessions critical for confirmation.
Key Support and Resistance Levels to Watch
The market’s near-term path will largely depend on how Nifty behaves around critical price points. On the downside, the immediate support is placed at 24,456.10 — a horizontal level tested multiple times during the correction. A decisive break below this could pull the index back to 24,317, and further down to the major psychological mark of 24,000.
On the upside, resistance is seen at 24,781.95, which coincides with the 20-day Bollinger Band middle line. A successful breach could take Nifty toward 25,246.69, where selling pressure may re-emerge. Above that, the all-time high zone of 25,641.40 remains the ultimate target for the bulls in the short term.
F&O data also suggests that traders have built fresh call positions at the 24,800 and 25,000 strikes, indicating that the market expects a consolidation-to-upside scenario rather than a deep correction. “We are witnessing short covering at lower levels. If the global market tone improves, Nifty can quickly retest 25,000 levels,” said an equity derivatives expert from a leading brokerage firm.
Derivative Signals Indicate Short Covering
Options data for the August expiry show significant call writing unwinding at the 24,500 strike and fresh put writing at the 24,400 and 24,500 strikes. This shift suggests that market participants are increasingly confident about the index holding above its recent lows.
Put-Call Ratio (PCR) for the day stood at 1.12, up from 0.94 in the previous session, signaling bullish sentiment among traders. Volatility Index (India VIX) cooled off to 12.45, indicating reduced fear in the market. Historically, such low volatility readings, when accompanied by a breakout, often precede a gradual uptrend.
However, seasoned traders caution against getting overly optimistic too soon. “While the breakout is encouraging, one should watch for a follow-up move. The macro environment remains uncertain, with crude oil prices volatile and the U.S. Fed minutes due later this week,” remarked a technical analyst.
Global and Domestic Factors Influencing Nifty’s Next Move
Nifty’s current movement cannot be viewed in isolation from broader macroeconomic cues. Global markets have been mixed, with Wall Street indices recovering slightly after recent losses. Asian peers like Nikkei and Hang Seng have shown strength in the last two sessions, providing some positive spillover to Indian equities.
On the domestic front, inflation numbers for July came in slightly above expectations at 5.15%, sparking concerns about RBI’s rate stance. However, industrial production data showed resilience, with the manufacturing sector posting robust growth. This mixed bag of economic data has kept traders cautious.
Corporate earnings season is also influencing stock-specific movements. IT majors have posted better-than-expected results, providing a cushion to the index. Banking stocks, however, remain under pressure due to rising concerns about loan growth moderation in the coming quarters.
Foreign Institutional Investors (FIIs) have been net sellers in August so far, withdrawing nearly ₹8,500 crore from Indian equities. Domestic Institutional Investors (DIIs), on the other hand, have stepped up buying, preventing a deeper fall in Nifty.
Outlook: Can Nifty Sustain the Breakout?
The short-term outlook for Nifty hinges on whether today’s breakout sees follow-through buying. A close above 24,800 with healthy volumes would strengthen the bullish case, potentially leading to a retest of 25,250–25,300 levels in the coming sessions.
For positional traders, risk management remains key. The 24,450 level should be treated as a stop-loss for long positions, while profit booking can be considered near 25,250. Swing traders may also find opportunities in sectors like IT, FMCG, and select auto stocks, which are showing early signs of relative strength.
Long-term investors might view this phase as a consolidation within a broader uptrend, given that the index remains well above its 200-day moving average. Unless global shocks derail sentiment, the Nifty’s long-term bullish structure remains intact.
Disclaimer:
This article is for informational purposes only and does not constitute financial advice. Market investments are subject to risks, and readers are advised to consult a certified financial advisor before making trading or investment decisions.
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