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The NSE Nifty 50 has slipped 3.4 per cent, or 764 points, in the last five trading sessions, after registering a fresh all-time high at 22,794.70 on Friday, May 03, 2024.
In the process, the Nifty 50 index is seen quoting close to its 100-DMA (Daily Moving Average) of 21,970 for the second time in less than a month.
Earlier on April 19, 2024, the Nifty 50 had tested the 100-DMA support, and then staged a smart rally of 4.7 per cent, or 1,017 points, to hit the new peak of 22,794.70.
Technically, the Nifty has been facing resistance around the super trend line on the daily chart, which stands at 22,740 levels.
Even as the broader trend remains positive, as the shorter-term moving averages are holding comfortably above the longer-term moving averages, key momentum oscillators both on the daily and weekly chart are in favour of further downside, technical charts suggest.
As such, break and sustained trade below the 100-DMA at 21,970 levels, can open the doors for a steeper fall towards the 200-DMA, which stands at 20,825 levels suggesting a potential downside risk of 5.5 per cent, or 1,225 points, from the present 22,050-odd levels.
The Nifty 50 index, according to Jigar Patel, senior manager for equity research (technical) at Anand Rathi, has been trading in a rising channel pattern since January 15 till date.
The index, he believes, appears oversold on the weekly charts and could stage a 200-300 point recovery in the short-term.
From a long-term perspective, however, the index can slip to 20,500-20,600 levels post the Lok Sabha 2024 election result outcome that is scheduled to be announced on June 04.
That said, 21,900 is the key level for the Nifty 50 from where I expect some sort of recovery in the markets, he said.
Out of the Nifty 50 stocks, as many as 37 Nifty constitutes are trading above the 200-DMA.
In the broader Nifty 500 index, 354 stocks are trading above the long-term moving average.
A breach of 22,150-22,100 levels on the Nifty 50 index, said Sameet Chavan, head of research - technical and derivative at Angel One, could signal a 'Rising Channel' breakdown, potentially leading to further decline towards 22,000 levels and the index can then test April lows of 21,800 in the near term.
Although we do expect a break of this support sooner or later, short-term consolidation or a relief bounce from current levels due to oversold conditions cannot be ruled out.
In such a scenario, intra-day traders can emphasize on stock-specific movements, while positional traders might view this bounce as an opportunity to trim long positions, especially as we get closer to the key Lok-Sabha election results, Chavan said.
How much can the Sensex fall from the current levels?
Meanwhile, the S&P BSE Sensex has shed 3.3 per cent or 2,471 points from its recent high of 75,095.
It may be noted that the BSE Sensex failed to register a new high in the preceding rally.
The all-time high for the BSE benchmark index stands at 75,124, hit on April 09, 2024.
The Fibonacci chart suggests that the BSE Sensex has near support at 72,240 levels, below which the index can slide to 71,000-mark, with a further dip to 68,850 levels also seems possible.
Having said, the overall market breath seems favourable, with a high number of stocks trading above their respective 200-DMA (Daily Moving Average) a key long-term average that underlines bearish and bullish sentiment for any underlying stock/index.
