Nifty50 Slips Below 24,000: Key Levels to Watch as Market Sentiment Shifts

The Nifty50 index slipping below the critical 24,000 level has sent ripples across the market, prompting analysts and traders to brace for potential shifts in sentiment and volatility. With current trading levels hovering near 24,027.05 and a 114-point drop, the technical and fundamental indicators suggest critical points to watch as the index approaches sensitive levels. Here’s a closer look at the support, resistance, and overall market outlook.

Support Zone for Nifty50

A closer analysis of the daily chart reveals that the Nifty50 recently breached the neckline of a classic Head and Shoulders pattern. The technical target for this formation stands around 23,500, making it a key level of support. Adding strength to this zone, the 23,500-23,600 range aligns with multiple technical supports, including a horizontal trendline and the crucial 200-day moving average (DMA). Should the index test these levels, investors will closely monitor them.

Resistance Levels for Nifty50

On the upside, the index faces strong resistance within the 24,500-24,800 range. To regain a positive directional bias, Nifty50 would need to break and close above this zone, thereby forming a higher high on the charts. The 20-week moving average, positioned at 24,776, adds another layer of short- to medium-term resistance. Any movement above these levels could signal a potential shift in momentum, but until then, the index remains under pressure.

Key Technical Indicators 

Several key technical indicators further confirm the current bearish momentum:

• RSI: The weekly Relative Strength Index (RSI) recently fell below the critical 50 level after October 2023. A drop below 40 could indicate deeper market pain, as this level historically provides support.
• MACD: The Moving Average Convergence Divergence (MACD) points to strong bearish momentum, reflecting increased selling pressure.
• ADX: The Average Directional Index (ADX) stands at 15.87, with the -DMI above the +DMI, suggesting a bearish trend. A low ADX value reflects a weaker trend, reinforcing the likelihood of further downside if selling continues.
• KST: The smoothed KST (Know Sure Thing) indicator has recently given a fresh bearish signal, further adding to the cautious outlook.

Fundamental Weakness: Earnings Cycle Peaking

The technical indicators are not alone in painting a cautious picture. On the fundamental front, the earnings cycle appears to have peaked, with many companies unable to meet earnings expectations. Around 66% of Nifty 200 companies have downgraded their earnings projections, reflecting broader economic challenges. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.