Nifty Trade Setup for September 9: Nifty Down 1,151 Points from August High; RSI Hits 5-Month Low, Is a Rebound Due?

Bears continued to dominate the Nifty 50 on Tuesday, with the index declining 0.61% and recording its lowest close in nearly three months. After opening lower, the index remained under pressure throughout the session and eventually settled near the day’s low at 23,635, extending its decline for the second consecutive session.

ICICI Bank, HDFC Bank and Reliance Industries were the biggest drags on the benchmark. Together, the three index heavyweights contributed nearly 89 points to the Nifty 50’s decline. Broader market breadth also remained tilted towards declines.

Media, Pharma and FMCG Buck the Trend

Among the sectoral indices, Nifty Media, Nifty Pharma and Nifty FMCG emerged as the top gainers. Nifty Media led the pack with a gain of 1.31%.

On the other hand, financial stocks remained under pressure, with Nifty Financial Services declining 0.93% to emerge as the worst-performing sectoral index of the day.

Nifty Nears Crucial Swing-Low Support

Tuesday’s price action resulted in the formation of another bearish candle, while the sequence of lower highs and lower lows remained intact. Following the latest decline, Nifty has now almost retraced the entire previous upswing from its July low to the August high.
The short-term trend has weakened further as the 20-DMA has crossed below the 50-DMA. More importantly, the gap between the two moving averages is widening, indicating increasing downside momentum.

From its August 3 high, Nifty 50 has declined by 1,151 points and is now approaching its previous swing low of 23,606. The ongoing downswing is also around 10 sessions old, raising the possibility of a pause or short-term recovery near this support zone.

The 23,606 level therefore remains crucial. A decisive break below this support could extend the correction towards 23,478.

On the upside, Nifty first needs to move above Tuesday’s high of 23,759. Sustaining above this level could open the way for a recovery towards 23,890.

RSI Nears Oversold Territory

The 14-period daily RSI has slipped towards the 30 mark, its lowest level in more than five months, indicating that the index is approaching oversold territory.

However, the MACD histogram continues to show increasing bearish momentum, suggesting that the underlying trend remains weak despite the stretched momentum readings.

Relief Rally Possible, but Trend Remains Weak

The overall technical structure of Nifty remains bearish. However, after the recent sharp decline, the index is approaching an important support zone while the RSI is nearing oversold territory.

A relief rally could emerge if Nifty manages to defend the 23,600 zone and subsequently sustain above 23,759. Even in such a recovery, selling pressure may reappear at higher levels as the broader trend remains weak.

For now, aggressive long positions are better avoided until the index shows clearer signs of stability and confirms a reversal from the current support zone.