After forming an inside candle on Wednesday, the Nifty witnessed a breakdown from the inside candle pattern on Thursday, opening with a gap down. Selling pressure increased as the session progressed, with the index slipping below the low of the long bearish candle formed on September 15. The decline further intensified as the Nifty breached the horizontal trendline support near the 23,070 level.
Nifty breakdown from 4-month long horizontal support zone
The day’s movement resulted in the formation of a long bearish candle with a gap-down opening, reflecting strong selling interest among market participants. The index closed below the June 8 swing low of 23,070, confirming a breakdown from the four-month-long horizontal support zone.
23,000 remains a crucial level for Nifty
The overall technical setup has turned negative, with bears gaining control in the short term. A sustained break below the 23,000 mark could extend the decline towards the next support level of 22,719 in the near to medium term. On the upside, any recovery attempt is likely to face resistance in the September 24 gap zone, placed between 23,282 and 23,350.
RSI shift to super bearish range
The 14-period daily RSI is currently placed near 31. During the recent recovery attempt, the RSI failed to cross above the 40 mark and reversed lower, indicating a shift towards a super bearish range. The MACD histogram has also expanded on the downside, highlighting increasing bearish momentum.
Stock to Watch: South Indian Bank
South Indian Bank witnessed a strong rally of nearly 32% from its May 18 low to the June 18 high. Thereafter, the stock retraced around 50% of the previous upmove and entered a consolidation phase, forming a triangular pattern.
Recently, the stock has delivered a breakout from the triangular formation, supported by strong volumes. The NSE recorded the highest single-day trading volume in over two months, indicating increased participation during the breakout. Additionally, the stock is trading above its key short-term, medium-term, and long-term moving averages, suggesting a positive trend.
The 14-period daily RSI has moved into bullish territory, while the daily MACD is trending upwards and sustaining above its nine-period average, confirming the improving momentum and positive bias in the stock.
In short, the stock has witnessed a decisive breakout, and sustaining above the ₹50 level could keep the momentum intact. Going forward, the stock has the potential to test the ₹55–58 zone. Traders can consider a stop loss at ₹46.50.
