Technical View: Bearish momentum indicators and elevated VIX suggest caution; Nifty 50 may consolidate below 26,000, Bank Nifty outperforms above 60,000

Nifty outlook for January 19

• Nifty remains in 25,600-25,900 range
• Bearish momentum indicators, elevated VIX suggest caution for bulls next week
• Bank Nifty outperforms, crosses 60,000

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The Nifty 50 made a good attempt to reclaim the 25,900 level (near the 50-day EMA) but failed again and eventually finished the session, as well as the week, moderately higher near 25,700 on January 16. Broadly, it has remained in a 25,600–25,900 range throughout the week, forming Doji-like candlestick patterns on both the weekly and daily charts, indicating indecision among market participants.

Experts expect the benchmark index to remain within the same range in the upcoming sessions as well, until the said range is decisively broken on either side. On the higher side, 26,000 is the level to watch; however, a break below the 25,600 support could drag the index down to 25,450, the week’s low, experts said.

The Nifty 50 opened higher and climbed to 25,873 in the morning but could not sustain at higher levels and erased 179 points from the day’s high to close at 25,694, up 29 points.

Momentum indicators remained bearish on both the weekly and daily charts, with the MACD generating a sell crossover. The RSI, at 40.54 on the daily scale and 53.31 on the weekly scale, remained below the signal line.

“In the near term, the market is likely to remain in a consolidation phase, with signs of distribution emerging at higher levels,” said Nilesh Jain, Head – Technical and Derivatives Research Analyst (Equity Research) at Centrum Broking.

However, according to him, a decisive move above 26,000 could trigger a short-covering rally, indicating the possibility of a short-term bottom formation.

Weekly options data indicated that the 25,800–26,000 zone is expected to act as resistance for the Nifty 50, while support is seen at 25,500.

The maximum Call open interest was observed at the 26,000 strike, followed by the 25,800 and 26,500 strikes. Maximum Call writing was seen at the 25,900, 26,100, and 25,800 strikes. Meanwhile, the 25,700 strike held the maximum Put open interest, followed by the 25,500 and 25,000 strikes, with the highest Put writing at the 25,700, 25,500, and 25,600 strikes.

Bank Nifty

The Bank Nifty witnessed a decisive breakout from the last four days of consolidation and climbed convincingly not only above all key moving averages but also above the 50 percent Fibonacci retracement of the recent fall. The banking index closed above the psychological 60,000 mark for the first time since January 6, surging 515 points (0.86 percent) to 60,095 on strong volumes and extending gains for the fourth straight session. It has jumped 1,230 points from the week’s low.

Momentum indicators also showed gradually strengthening trends. The RSI, at 61.43, registered a bullish crossover, while the Stochastic RSI maintained a positive crossover. The MACD is on the verge of turning positive, with weakness almost fading from the histogram.

For the week, the Bank Nifty rallied 1.42 percent and formed a long bullish candle on the weekly chart. The RSI is close to a bullish crossover, while the MACD remained above the signal line, with the histogram sustaining above the zero line.

“Friday’s session added a positive tone to the overall chart structure of the Bank Nifty index. Considering the above technical setup, the outlook remains bullish. Immediate support is placed near the 59,500 level, aligned with the current position of the 20-day SMA,” said Vatsal Bhuva, Technical Analyst at LKP Securities. On the upside, he added, the index is expected to test the 60,500 resistance zone.

He advised maintaining a buy-on-dips strategy as long as the index sustains above the 59,200 level.

Meanwhile, India VIX, also known as the fear gauge, remained in an elevated zone and sustained above all key moving averages (except the 200-day EMA), signalling serious caution for bulls. It rose 0.46 percent to 11.37 on Friday and gained 4.1 percent for the week, continuing its uptrend for the third consecutive week.