Nifty 50 faces volatility amidst caution ahead of US data: Market analysis & strategies

In the dynamic world of stock markets, the Nifty 50 encountered a rollercoaster ride on May 3, with initial gains wiped out within the first hour of trading. As the session progressed, heightened volatility dominated the market sentiment, possibly driven by cautious anticipation surrounding the impending release of US non-farm payrolls data and April’s unemployment rate.

Despite the turbulent start, technical indicators suggest a potential upward trajectory for the Nifty 50. Analysts note that the index successfully defended the crucial 22,300 level, hinting at a possible move towards the 22,700-22,800 range in upcoming sessions, provided the index maintains this support level. However, a breach below 22,300 could lead to a downward spiral towards the 22,000 mark, according to experts.

The day began on a positive note for the Nifty 50, reaching an all-time high of 22,795 after opening strong at 22,766. However, a surge in selling pressure during the initial hour reversed the gains, leading to a significant decline by the end of the trading day. The index closed at 22,476, marking a decrease of 172 points and forming a long bearish candlestick pattern with a small lower shadow on the daily charts, engulfing the previous three candles.

Technical analysis further reveals a near-term bearish sentiment, as the Nifty 50 exhibits signs of a Double Top pattern on the daily chart, coupled with a Bearish Engulfing candle. Market data highlights key resistance levels at 22,600-22,700, with notable Call writing observed in the options market. Conversely, immediate support is identified at 22,300, with a breach below this level potentially intensifying downward momentum.

The Bank Nifty, on the other hand, faced significant downward pressure, breaching the 49,000 mark and falling below the upward sloping resistance trendline. Despite the decline of 308 points to 48,924, the index managed to cling to the 10-day Exponential Moving Average (EMA) at 48,683, serving as immediate support, followed by the 21-day EMA at 48,300.

Amidst the market turmoil, volatility remains a significant concern, with the India VIX, or fear index, experiencing a notable increase of 8.72 percent to 14.62. This surge adds to the total seven-day gains, amounting to 43.4 percent, further contributing to the unease among market participants.