NIFTY – Technical Analysis
NIFTY has taken a sharp turn, with the recent slump raising serious questions about the strength of the broader trend. What once looked like a stable advance is now being tested by growing technical pressure.
In this update, we break down the index using candlestick structure, momentum signals, and Elliott Wave context to determine whether the long-term outlook is still intact—or beginning to crack—and identify the key levels that could define the next move.
CANDLES
We have not discussed NIFTY since November, and recent developments point to a clear shift in dynamics. The index closed the year with a bearish Inside candle following ten consecutive green years—a concerning pattern that historically points to a move toward the 14,800–13,770 INR support zone, aligning with the projected area near the 20 EMA on the annual frame.
Across time frames, the technical picture continues to deteriorate. The daily and weekly trends are declining, with the daily nearing a 100/200 DMA cross after a fresh 50/200 DMA death cross. The monthly is tracking for a strong bearish continuation, while Q1 is likely to close with a Bearish Engulfing. Overall, the outlook for the Indian market has turned decisively bearish.
ELLIOTT WAVES
The index failed to develop a full-fledged impulse for wave 5 from the April 2025 lows and instead formed an Ending Diagonal for wave 5 of (1), which triggered a sharp and aggressive move downward. The current structure suggests the index is in wave iii of the decline, with a high probability of evolving into a larger impulsive move—potentially wave A of a broader ABC correction for wave (2), assuming wave (1) began in 2020.
The most typical target area for wave (2) lies within a 0.5–0.786 retracement of wave (1), implying a range of 16,940–11,550. Notably, the levels derived from the candlestick analysis align within this range, clustering around the 0.618 retracement.
The chart above reflects the long-term perspective, while the chart below highlights the current impulsive move to the downside.
SUMMARY
NIFTY continues to show a clear shift from a prolonged bullish phase into a developing corrective cycle. The failure to form a clean impulsive wave 5 and the completion of an Ending Diagonal for wave 5 of (1) triggered a sharp and aggressive decline. The index now appears to be in wave iii of the move lower, with strong potential for this structure to evolve into a larger impulsive leg—likely wave A of a broader ABC correction for wave (2), assuming wave (1) began in 2020. The most typical target zone for wave (2) lies within the 0.5–0.786 retracement of wave (1), implying a wide range of 16,940–11,550, with confluence around the 0.618 level.
Across time frames, the technical backdrop remains firmly bearish, with momentum expanding and larger-frame signals aligning to the downside. From a macro perspective, the risks are also building. A potential escalation in the Middle East, particularly involving disruptions to the Strait of Hormuz, could push oil and gas prices significantly higher. For an energy-import-dependent economy like India, this would increase inflationary pressure, strain corporate margins, and weigh on growth—factors that could reinforce the bearish technical outlook and accelerate the correction. A prolonged disruption or failure to quickly restore key shipping routes could introduce additional constraints on supply chains, extending the bear market for a longer period—potentially quarters or even years.
