Markets Stabilize After a Tough Run – What’s Next?

StockEdge Morning Market Analysis – February 18

After eight consecutive losing sessions, the market finally showed signs of stability yesterday. The Nifty 50 gained 30 points to close at 22,959, recovering from the day’s low within the first 15 minutes. The broader market also rebounded smartly, indicating that buyers are stepping in at lower levels.

Key Highlights from Yesterday’s Session:

• Sectoral Strength: Nifty Pharma and Nifty Metals emerged as the top gainers.
• Bank Nifty: Held firm above 49,000, demonstrating resilience.
• Broader Markets: Showed a strong recovery after being in an oversold zone.
• Global Cues: The Dollar Index pulled back and is now trading below 107. Meanwhile, US indices, including the S&P 500 and Dow Jones, continue to trade near their 52-week highs.

Technical View: Oversold Conditions, Strong Support at 22,800

Nifty once again found support at 22,800, a level that has held multiple times in recent weeks. Although it briefly slipped below this mark in early trade, strong buying emerged, leading to a positive close.

Only 9 percent of NSE 500 stocks are trading above their 50-day simple moving average, signaling extremely oversold conditions. Importantly, the daily 14-period RSI has not made a new low, suggesting early signs of strength.

• Immediate resistance levels: 23,200 and 23,500
• Breakout confirmation: A move above 23,500 could signal that a bottom is in place, opening the possibility for targets at 23,850 and 24,200.
• Key support level: 22,800. A breakdown below this could lead to a further decline of 3 to 4 percent, though this scenario appears less likely given the current setup.

Outlook: Cautious Optimism

Despite recent volatility, the broader bull market remains intact. The four-month-long decline has already priced in weak earnings and high valuations, improving the risk-reward ratio for long-term investors. Oversold signals across multiple indicators suggest a potential pullback reversal. A decisive move past 23,500 could confirm a sustained recovery.

Key Levels for the Day

Nifty

• Support: 22,800, 22,600
• Resistance: 23,200, 23,400

Bank Nifty

• Support: 49,000, 48,700
• Resistance: 49,350, 49,500

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