Nifty breaks losing streak, but continues to trade in broader consolidation range

Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities

Nifty index broke its four-session losing streak and managed to reclaim levels above its 20-day exponential moving average (DEMA). However, despite this short-term relief, the benchmark has failed to register a weekly positive close for the past three weeks, continuing to trade within a narrow band. Structurally, the index remains entrenched in a sequence of lower highs and continues to oscillate within a broader consolidation range. On the downside, the index has carved out a notable demand zone, reinforced by the formation of a double-bottom pattern, lending strength to support levels. Yet, the upside remains capped as the Nifty continues to hover below its recent swing high of 26,065, clearly defining the prevailing trading range. On Friday, the index settled higher by 150.85 points, ending the session at 25,966.40.

While the index has consistently found support at lower levels, upside attempts continue to encounter stiff resistance. Intraday recoveries are being met with selling pressure, with market participants using pullbacks as opportunities to initiate fresh short positions. Unless the index delivers a sustained breakout above the crucial swing-high zone of 26,100-26,200, any rally is likely to be viewed with caution and may risk turning into a bull trap.

From a technical perspective, the Nifty remains locked in a consolidation phase, with the broader range demarcated between 26,220 on the upside and 25,700 on the downside. The persistent lower-high formation keeps the 26,200 mark as a pivotal threshold for any meaningful trend reversal. Momentum indicators further support this cautious stance, as the Relative Strength Index (RSI) continues to hover below the neutral 50 mark, highlighting the lack of strong directional momentum and pointing toward a phase of time-wise consolidation rather than a sharp correction.

Derivatives Snapshot

The derivatives landscape signals a growing undertone of caution. Call writers have added fresh positions at at-the-money and nearby strikes, reinforcing overhead resistance with every upward move. On the other hand, put writers have trimmed some exposure and rolled positions to lower strikes, indicating expectations of prolonged consolidation rather than an immediate directional breakout.

A substantial build-up of nearly 1.41 crore call contracts at the 26,000 strike firmly establishes this level as a strong resistance zone. Conversely, the accumulation of around 1.36 crore put contracts at the 25,900 strike offers a solid support cushion. The Put-Call Ratio (PCR) has improved to 1.10 from 0.66, reflecting a marginal rise in optimistic sentiment and suggesting that buyers remain active in defending lower levels.

Market Outlook

The Nifty staged a measured recovery toward the end of the week; however, the near-term structure continues to appear fragile. The broader setup remains vulnerable amid the ongoing lower-high pattern, with sellers maintaining a strong presence in the 26,100-26,200 resistance corridor. On the downside, the 25,800-25,700 band has emerged as a critical demand zone and will be instrumental in sustaining short-term stability.

The concentration of both call and put writing around at-the-money strikes, coupled with aggressive positioning by market participants, underscores the tightly bound nature of the current range. A decisive and sustained move above 26,100 could revive bullish momentum and open the door for an advance toward the 26,350 region. Conversely, a breakdown below 25,900 may undermine the broader structure, invite fresh selling pressure, and drag the index toward the 25,700 level, thereby extending the ongoing consolidation phase.

Source : Equity Bulls

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