The Nifty 50 Futures have been in a sustained downtrend, with bearish sentiment taking over since the to last year September. The performance metrics show a weak outlook across all timeframes, while technical levels show the possibility of further downside. Let’s break down the technicals.
Performance Metrics Overview
- 1 Week: -2.33%
- 1 Month: -5.32%
- 3 Months: -7.33%
- Year-to-Date (YTD): -2.08%
- 6 Months: -5.87%
- 1 Year: +5.47%
Technical analysis
Price Below Moving Averages:
- The Nifty futures are trading below both the 50-day SMA (24,050) and the 100-day SMA (24,589.6), reinforcing bearish momentum.
Momentum Indicators:
- The RSI (35.03) is approaching oversold levels but has yet to show signs of a reversal. This suggests there could be more downside before any significant bounce.
Downtrend Structure:
- Price continues to form lower highs and lower lows, consistent with a bearish trend.
Support and Resistance Levels
Resistance Levels:
- 24,050 (50-day SMA): Immediate resistance that must be reclaimed for any bullish recovery.
- 24,589.6 (100-day SMA): A more significant resistance level that aligns with recent breakdown zones.
Support Levels:
- 23,000: A psychological and technical support level that is now in focus.
- 22,500: A key zone from prior consolidation, offering further support if selling intensifies.
Seasonality:
The seasonality chart historically shows a strong start for the Nifty in January, as this month often aligns with fresh inflows into equity markets due to the beginning of a new calendar year, portfolio reallocations by institutional investors, and renewed optimism in global markets. Over the past three years, January has consistently delivered positive performance for the Nifty, as evident in the seasonal data for 2023 and 2024 (as displayed on the chart). These years reflect a pattern of bullish momentum, with the index benefiting from favorable macroeconomic conditions and rising investor confidence.
Bullish and Bearish Scenarios
Bullish Case:
- A recovery above the 50-day SMA (24,050) would indicate that bulls are attempting to regain control.
- RSI bouncing from oversold levels could spark a short-term rally, targeting 24,589.6 (100-day SMA).
Bearish Case:
- Continued weakness below 23,000 would signal further downside, exposing the next support at 22,500.
- Failure to hold 22,500 could accelerate selling, targeting deeper levels around 22,000 or lower.
Trade Ideas
Bearish Setup:
- Entry: Short positions below 23,200, targeting a breakdown toward 23,000 and 22,500.
- Stop-Loss: Above 23,500 to manage risk.
Bullish Setup:
- Entry: Long positions near 23,000, if there are signs of support holding.
- Targets:
- First target: 24,050 (50-day SMA).
- Second target: 24,589.6 (100-day SMA).
- Stop-Loss: Below 22,800 to limit risk.
