Nifty nears crucial support range. Can it stage a recovery?

Nifty's fall on Thursday has sent the 50-pack index to sub-19,800 levels from near 20,200 level in a span of just three trading sessions, pushing the index towards a crucial support range that coincides with the 20-day simple moving average and the 50 per cent Fibonacci retracement level. Analysts expects the market to respect the support range but any substantial upside looks capped, as long as the index stays below the 19,850 level, they said. 

Thursday marked the second day of gap-down opening for Nifty. It breached its 20-day EMA and eventually settled the day at 19,742.35, down 159.05 points or 0.8 per cent. Nifty is in the process of retracing the rise from 19,223 to 20,222 on the daily chart, said Jatin Gedia, Technical Research Analyst at Sharekhan. 

"It has now reached the zone of 19,720–19,680 where support in the form of the 20-day moving average and the 50 per cent Fibonacci retracement level is placed. We expect Nifty to hold on to this support and provide a pullback. The daily momentum indicator today has provided a negative crossover which is a sell signal and is now in sync with the price action. In terms of levels, 19,680–19,604 is the crucial support zone while 19,850–19,900 shall act as an immediate hurdle zone," Gedia said.

Shrikant Chouhan of Kotak Securities said the Nifty has completed one leg of correction, and for the bulls now, the 19,700 level would be the key level to watch out for.

"If the index succeeds to trade above the same, we could expect one relief rally, and above 19,700 the market could rally till 19,825-19,875. On the flip side, fresh selling is possible only after the dismissal of 19,700 and below the same, the index could slip till 19,650-19600,” Chouhan said.

Rupak De, Senior Technical analyst at LKP Securities said a close below 20-EMA signaled a diminishing bullish sentiment. "Weakness appears evident with a bearish crossover on the RSI. Selling on rallies remains the favoured strategy as long as it stays below 20,000. On the downside, support is seen in the range of 19,700-19,630," he said.

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