By Dalal Street Investment Journal (DSIJ)
Trade set up for February 20: Nifty breaks below 20 and 50-DMA after sharpest fall since Union Budget Day. Key support and resistance levels to track and what the chart signals for February 20.
On Thursday, the Nifty 50 opened higher, but selling pressure emerged soon after the open at higher levels. Within the first hour, the index slipped below 25,750. As the session progressed, the sell-off intensified, pushing the index below both the 20-DMA and 50-DMA. By the close, it had ended below 25,500, down nearly 430 points from the day’s high. This was the sharpest single-day decline since Union Budget Day.
The decline was broad-based. Over 90% of Nifty 50 constituents ended in the red, with only four stocks closing in the green. The volatility gauge, India VIX, also jumped in double digits to around the 13.5 zone.
With the index falling more than 400 points from day’s high, this resulted in formation of a sizable bearish candle. The move erased gains from the previous three trading sessions and, on the way down, the index broke below the 20-DMA and 50-DMA. The 50-DMA is trending lower, highlighting a weakening intermediate trend. The index also breached a key support zone defined by the upward-sloping trendline drawn by connecting the Union Budget Day low and Monday’s low.
Going ahead, 24,370 is the key level to monitor. A sustained break below this level could lead to a gap-fill of the February 3 gap, with the lower end of that gap near 25,108.
Momentum indicators have also weakened. The 14-period daily RSI has slipped below 50 and is now below its 9-day average. The MACD is on the zero line and nearing a bearish crossover. The -DI has moved above 30 and is rising, while the +DI continues to trend lower. Overall, this setup remains unfavourable for the market.
On the upside, Thursday’s high marks the latest minor lower swing high. As long as the index trades below 25,885, aggressive long positions should be avoided, as this level is likely to act as strong resistance in the near term. Friday’s close will be important. On the weekly chart, the candle has already moved below the prior week’s low. If the index closes below that level, it would suggest a return to a broad trading range with a negative bias.
SEBI Registered Research Analyst (INH000006396).
Founded in 1986, Dalal Street Investment Journal (DSIJ) brings decades of experience in India’s equity markets. DSIJ's research combines fundamental analysis with price action, guided by disciplined risk management and capital preservation. They follow a structured, data-driven approach designed to help investors and traders make informed decisions beyond short-term market noise.
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