Nifty Breaks Key Support: Is a ‘Sell-on-Rise’ Market Taking Shape?

The Indian equity markets ended the week on a cautious note, with Nifty slipping below crucial support levels, raising concerns over a possible shift in momentum. The benchmark index fell sharply on Friday, dragging down overall sentiment and signalling the emergence of a “sell-on-rise” strategy in the short term.

Nifty Ends Below Key Levels: What It Means

Nifty ended Friday at 24,837, down 0.90%, marking its fourth week in a row of losses. For the first time in weeks, it finished below its 50-day Simple Moving Average, which could signal more trouble for the recent bullish trend.

A more alarming signal is the breakdown below the 24,900 level, which had earlier served as a reliable support. This suggests that the bulls are losing control, and bears are gaining strength.

Technical Breakdown: Indicators Turning Bearish

• Moving Averages: A widening gap between the 9-day and 20-day Exponential Moving Averages (EMAs) hints at short-term bearish pressure.
  
  

• Fibonacci Retracement: The index breached the crucial 61.8% retracement level (from the previous swing low to high), indicating a failed recovery attempt.
  
  

• Relative Strength Index (RSI): The daily RSI has slipped to 40, close to the oversold area. The MACD also continues to diverge, which adds to signs of a weakening trend.
  
  
• India VIX: Volatility picked up sharply, with India VIX rising by 5.22% to 11.28, reflecting rising investor anxiety.

Shift in Sentiment: From Buy-on-Dips to Sell-on-Rise?

Recent changes in technicals and sentiment hint at a shift in how the market is behaving. Instead of buying on dips, traders may now look to sell when prices rise, unless Nifty climbs back above 25,200.

Nifty Bank: Short-Term Selloff Amid Resistance

The Nifty Bank index also had a tough day, ending at 56,528.90, down 0.94%. It saw a sharp drop during the session and kept running into resistance from a falling trendline.

While the index did register a marginal weekly gain of 0.44%, short-term indicators are flashing caution:

• Below EMAs: The index has dropped below both its 9-day and 20-day EMAs.
  
  

• Above 50-day SMA: However, it still holds above the 50-day SMA, offering some hope of support.
  
  

• RSI Trends: Daily RSI stands at 48 (slightly bearish), while the weekly RSI is still strong at 62, indicating the broader trend is not entirely broken yet.

Sector Drag: Private and PSU Banks Underperform

• Nifty Private Bank index fell 0.97%

• Nifty PSU Bank index declined 1.70%

Both private and public sector banks joined the broader selloff, adding to the weakness in the banking sector.

What to Watch Next: Key Levels

• Nifty Immediate Resistance: 25,200
• A strong close above this level is crucial to resume the upward trend.

• Nifty Bank Support: 56,200
• A breach below this may trigger further downside.
• Nifty Bank Resistance: 57,100
• Only a close above this could indicate a possible revival.

Final Thoughts

The market’s mood has changed. Momentum is fading and volatility is picking up. Unless the indices move back above resistance with strong trading volume, it makes sense to stay cautious and manage risk.

The onus now lies on upcoming macroeconomic data and corporate earnings to provide direction. Until then, it might just be a ‘sell on rise’ market.