Nifty 50, Bank Nifty Face Potential Follow-on Selling Pressure Amid Elevated Oil Prices

Nifty 50 Faces Bearish Sentiment Amid Elevated Oil Prices

The Nifty 50 may extend its previous day's downtrend amid the prevailing bearish sentiment and elevated oil prices, while remaining within the tight 23,300–23,800 range. Immediate support is placed at 23,500, followed by the crucial support zone of 23,400. However, in the event of a bounce-back, the 23,800–23,850 zone will be the key area to watch, as only a convincing move above it can bring bulls back into action.

Market Performance on May 19

On May 19, the Nifty 50 declined 32 points to 23,618, while the Nifty Bank slipped 128 points (0.24 percent) to 53,409. However, market breadth remained positive, with 1,942 shares advancing against 997 declining shares on the National Stock Exchange.

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Market Outlook and Strategy

Aditya Thukral, Founder & Analyst of AT Research & Risk Managers, suggests that the Nifty 50 continued to face resistance near the previous support zone of 23,800, which is now acting as resistance. However, the trend remained sideways as the index stayed within the recent swing low and swing high of 23,263 and 23,839, respectively. Such moves generally occur when markets are awaiting important news flow.

However, deteriorating market breadth and the index consistently trading below all major exponential moving averages, which are sloping downward, indicate weakness, and the index may break on the downside in the coming days.

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Technical Analysis

After the completion of the triple divergence pattern on April 2, the index witnessed a rally of more than 10 percent. However, the rally appears to be a mean reversion move, wherein the index bounced toward the 100-day EMA. Only a decisive breakout above 23,850 could bring bulls back into the picture for another leg of rally toward 24,125. Money continues to flow into small- and mid-cap stocks, while large-cap stocks are witnessing outflows, as reflected in the underperformance of the Nifty 50 compared to the midcap and smallcap indices.

Bank Nifty Outlook and Positioning

Ashish Kyal, Founder and CEO of Waves Strategy Advisors, suggests that the Bank Nifty traded within a narrow range and oscillated between gains and losses throughout the day, resulting in the formation of a neutral candle. On the daily chart, Bank Nifty has continued its downward trajectory over the past eight trading sessions, as not a single candle, except one, has managed to close above the previous day’s high during this period, indicating that bears remain firmly in control of the index.

Strategy

Aditya Thukral suggests selling Nifty Futures below 23,600 with a stop-loss at 23,700, targeting 23,400. Ashish Kyal recommends creating long positions in Bank Nifty Futures above 53,700 with a stop-loss at 53,400 and targets of 54,000 followed by 54,200. Preeti K Chabra suggests selling Nifty Futures near 23,771 for targets of 23,587 and 23,426, with a stop-loss at 23,850.