Bull trap or trend reversal? Rupak De breaks down Nifty’s 24,500 congestion zone

Synopsis

Indian equity markets are at a crucial juncture, with the Nifty hovering around 24,500, facing strong resistance. Analysts warn of a potential correction if the index fails to breach 24,750 soon. While some stocks like CG Power and M&M show resilience, the Bank Nifty's momentum is fading. Traders are advised to watch for dips in Vedanta and Firstsource.

The Indian equity markets are standing at a critical technical crossroads, leaving traders to wonder if the recent recovery is a genuine comeback or a sophisticated bull trap. While the Nifty has managed to secure two consecutive weeks of gains, it is currently locked in a "congestion zone" around 24,500, struggling to overcome heavy resistance at the 20-week EMA and key Fibonacci retracement levels.

Rupak De, Senior Technical Analyst at LKP Securities, notes that the index’s inability to move past the 24,750 mark over the next fortnight could trigger a meaningful correction. With momentum fading in the banking sector and the Nifty facing a triple-rejection at its moving averages, the margin for error is razor-thin.

In this chat, De dives into the technical hurdles facing the Nifty and Bank Nifty, and identifies the specific stocks, including CG Power, M&M, and Vedanta, that are showing resilience amidst the broader market uncertainty.

Edited excerpts from a chat:

Nifty ended with a weekly gain for the second consecutive time. How sustainable is the uptrend that we are seeing now?

The index once again faced resistance around the 20-week EMA this week, as the Nifty failed to reclaim the average for the third time in the last three weeks, highlighting it as a strong hurdle for the bulls. In addition, the recent recovery attempt stalled near the 61.8% Fibonacci retracement of the previous decline from the all-time high of 26,373 to the recent low of 22,182.

Live Events

Moreover, the index has so far failed to move above the rising trendline resistance, which continues to raise doubts about the sustainability of the ongoing rally. The current congestion around the 24,500 zone is also creating some uncertainty among market participants. While I am not expecting a complete reversal of the bullish trend at this stage, a meaningful correction from current levels cannot be ruled out if the market fails to move above 24,750 over the next one to two weeks.

On the downside, 24,000 is likely to remain a crucial support level, below which weakness could intensify further.

Nifty Bank also made a steady upmove but that comes after two weeks of losses. Where do you see the index moving in the week ahead?

Bank Nifty has lately been consolidating, indicating an indecisive phase before the next directional move. However, a closer look at the broader structure shows that the index recently faced resistance near the 200-day moving average and subsequently moved lower, signaling rejection from this crucial line of polarity.

Another point of concern is that the latest swing high was significantly lower than the previous peak near the all-time high, which reflects weakening momentum on the upside. Overall, the setup does not appear particularly encouraging at the moment.

In addition, the index has slipped back below the short-term 50 EMA, suggesting that the bullish momentum seen in April is gradually fading, with the market now appearing to drift into a downward consolidation phase.

Resistance is placed at 57,500, and unless the index moves decisively above this level, the trend is likely to remain weak. On the downside, supports are placed at 54,000 and 52,800.

Firstsource and Godrej Industries were among the top gainers in the week. What are the charts indicating at now?

After remaining under pressure for weeks and months, the stock has staged a strong rebound and delivered a breakout from a consolidation phase. The short-term outlook has clearly turned bullish. However, after such a sharp rally, it may be prudent to wait for some correction before considering fresh buying opportunities.

The stock could become an attractive buy around the 260 zone, with a stop loss placed below 248. On the upside, it may potentially move towards the 300–310 range over the near term.

A similar pattern is also visible on the chart of Godrej Industries. The stock appears to be offering a good opportunity for profit booking at current levels after its recent up move.

Vedanta shares ended the week 9% higher amid demerger. How to trade now?

After witnessing a strong rally in recent days, the stock may now be heading towards a meaningful short-term correction. However, the broader trend in the metal space continues to remain positive, making it a “buy on dips” candidate rather than a sell.

I would suggest keeping the stock on the watchlist for buying opportunities around the 280 zone, with a stop loss placed below 270. If the stock manages to recover after the correction, the price could once again move above the 300 mark over the near term.

Give us your top ideas of the week.

BUY CG POWER 873 SL 810 TGT 950

The stock, on the daily chart, has delivered a breakout from a flag pattern, indicating improving sentiment and rising optimism around the counter. In addition, it has been sustaining comfortably above the crucial 50 EMA, reflecting strengthening momentum and a healthy trend structure.

The daily RSI has also re-entered a bullish crossover and is currently trading in a strong momentum zone, which further supports the positive outlook. Overall, the technical setup remains encouraging, and the stock appears well positioned for potential short- to medium-term gains.

BUY M&M 3322 SL 3197 TGT 3710

The stock, on the weekly chart, has broken out above its previous consolidation range, signaling improving optimism around the counter. In addition, it has moved decisively above both the 20-week EMA and the 50-week EMA, indicating strengthening momentum and improving trend structure over the medium term.

The weekly RSI has also entered a bullish crossover, further supporting the positive outlook. Overall, the technical setup appears favorable, and the stock looks well positioned for the short to medium term.

Sell Bank of Baroda May 264.50 SL 270 TGT 254

The stock has been sustaining below all the key moving averages that matter for the short to medium term, reflecting persistent weakness in the overall trend. In addition, the stock now appears to be on the verge of breaking down from its recent consolidation phase, which could further intensify the bearish sentiment.

The RSI has re-entered a bearish crossover and is showing signs of further downside momentum. Overall, the technical setup looks weak, with the stock having the potential to decline towards 254 and possibly lower in the near term. On the upside, the trend is likely to improve only if the stock manages to move decisively above 270.

(You can now subscribe to our ETMarkets WhatsApp channel)

(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.

Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

...moreless

(You can now subscribe to our ETMarkets WhatsApp channel)

(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.

Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

...moreless

98 million SIP accounts power Indian equities. What if they stop?

Why oil at USD100 doesn’t shake India like it once did

Why PNG for every kitchen remains a pipe dream amid LPG crunch

INR35k-cr windfall: What Hormuz crisis, rising crude mean for ONGC, OIL

They couldn't make Indians play squash or rugby, but made them run

1

2

3