Trade Setup for August 12: Nifty rebounds from oversold levels but sustainability remains the key

The benchmark Nifty 50 index opened the week with a sharp reversal of sentiment, shaking off Friday’s slump to post a spirited recovery. In the first session of a holiday-shortened week, the index clawed back all of the previous session’s losses, rallying nearly 200 points intraday before closing at the day’s high.After a firm start, the market held its ground for most of the session, with intraday dips swiftly bought into. The surge in buying interest provided a much-needed breather, and the bulls maintained strong momentum throughout the day.

Finally, the Nifty ended 221 points higher at 24,585.

Leading the charge among the Nifty’s top performers today were Adani Enterprises, Tata Motors, and Eternal. Conversely, it proved to be a tougher session for Hero MotoCorp, BEL, and Bharti Airtel, which ended as the major losers within the Nifty pack.With the sole exception of Nifty Consumer Durables, all other sectoral indices ended the day in the green. Among them, Nifty PSU Banks, Realty, Healthcare, and Auto led the charge, recording the highest gains and signaling a widespread return of investor confidence.

The positive sentiment extended powerfully into the broader market as well. Both the Nifty Midcap and Smallcap indices gained alongside the benchmark. The Nifty Midcap 100 Index surged 0.85%, while the Nifty Smallcap Index rose 0.36%.

Meanwhile, foreign investors were net sellers in the cash market on Monday, while domestic investors were net buyers.

For the Nifty, support remains near the recent swing low around the 24,350 mark, as its lows over the last three sessions have hovered around that levels.

24,750 is the next hurdle that the Nifty will have to cross for further upside. In case the Nifty does cross the 24,750 mark, the next level that comes into play is the 20-Day Moving Average of 24,847.

According to Nagaraj Shetti of HDFC Securities, the near-term downtrend remains intact; however, the market has started showing early signs of a bottom reversal around the 24,340 level, which needs to be confirmed with sharp follow-through buying in the next session. Immediate resistance is placed around the 24,600–24,700 range.

Rupak De of LKP Securities said that the earlier breakdown now seems to have given way to a short-term pullback, as the market brushed aside recent weakness.

“We’re not completely out of the woods yet, but Monday’s bounce from the recent low carries enough steam to power further gains. Immediate support lies at 24,337, with the next upside targets seen around 24,850 and 25,000,” he said.

Nandish Shah of HDFC Securities observed that the short-term trend has turned positive, with the Nifty closing above its 5-day DEMA (24,553) for the first time in 13 sessions. For the past three consecutive sessions, the index has found support around the 24,340 level, establishing it as a strong short-term base. On the upside, the 20-day DEMA at 24,793 and the 50-day DEMA at 24,841 are expected to act as short-term resistance levels.

Rajesh Bhosale of Angel One said the recent price recovery observed over the past three trading sessions has established a sacrosanct support zone at the bullish gap of 24350, indicating the formation of a robust base.

Although a subsequent move that could confirm the countertrend is yet to occur, the current oversold conditions, along with the aforementioned support, suggest that some degree of relief may be anticipated in the near future, Bhosale added.