Support Cracks Below 57,000: Bank Nifty Gears Up for Deeper Pullback

The Bank Nifty index has entered a vulnerable phase, breaching key short-term support levels and flashing a bearish reversal. On the final trading day, the index slid 207.25 points to close at 56,791.95, confirming a bearish engulfing pattern on the daily chart—typically a strong signal of trend exhaustion and the potential for deeper corrections.

This marks the third consecutive session of lower closes, reinforcing a shift in sentiment from optimism to caution. While the broader structure remains bullish over the medium term, the short-term bias has shifted toward bearish or sideways, necessitating a tactical adjustment in trading strategy.

Technical Breakdown:

• Bearish Engulfing Reversal: This pattern indicates the end of recent bullish momentum and suggests a potential for short-term downside continuation.
• Support Breach: The break below the 57,000 psychological mark and key 10-day EMA highlights increasing downside risk.
• Resistance Realignment: New resistance has formed around 57,300–57,350, where aggressive call writing has emerged.
• Immediate Support: The zone between 56,300 and 56,500 now stands as the critical demand area.
• RSI Reading: The Relative Strength Index (RSI) has slipped below 60, indicating deteriorating bullish momentum.

Despite recent selling pressure, the market has not broken structurally—this appears more of a healthy retracement than the start of a prolonged downtrend.

Derivatives Snapshot: Bears Take the Wheel

The derivative setup now shows early signs of weakness:

• Put Writers Retreating: Positions are being rolled down, indicating the expectation of lower levels.
• Call Writers Active: OI buildup at closer resistance zones (especially 57,500 Call with 9.47 lakh contracts) signals a lack of conviction for upside.
• Strongest Support Zone: The 56,000 Put holds 21.28 lakh contracts, cementing it as the key base for now.
• Put-Call Ratio (PCR): Eased from 0.95 to 0.92, indicating a gradual bias shift toward bearishness.
• Max Pain: Has adjusted to the 57,000 strike, making it the near-term magnetic zone for expiry-related moves.

Sentiment & Trading Strategy:

With Bank Nifty closing below 56,800–57,000, and repeatedly failing to cross above prior highs, the market is clearly in a pause mode. The loss of momentum is apparent on both daily and intraday charts.

• Short-Term View: Expect more range-bound to downward price action, unless the index decisively breaks above 57,300.
• Trader's Playbook: Until then, adopt a “sell-on-rise” strategy, focusing on rallies toward resistance for potential short opportunities.
• Downside Targets: A move below 56,750 may accelerate selling toward 56,300.
• Upside Triggers: A daily close above 57,300 would invalidate near-term weakness and could set up a fresh move toward 58,000.

Conclusion: Tactical Caution Advised

The break below 57,000, paired with weakening technical indicators and derivatives cues, has shifted the short-term outlook from bullish to defensive. While the long-term trend remains intact, traders should tread cautiously—this is a market that demands tight risk management, disciplined entries, and flexibility.

Until strength resurfaces through a decisive breakout, the index is likely to remain under pressure, with each rise attracting sellers. For now, staying nimble and watching the 56,300–57,300 zone will be crucial for the next directional move.