Technical View: Bulls need to be cautious as Nifty tests 21,900 support for fourth consecutive session

Nifty likely to hit 21,500 if it breaks 21,900 in coming sessions

The Nifty 50 took support at 21,900 for the fourth consecutive session and closed the rangebound trade moderately higher on March 18. The absence of a crucial up move in the last few days amid consistent consolidation is not a good sign for the equity markets, hence if the index decisively breaks 21,900 support, then there is a possibility of Nifty falling towards 21,500, while on the higher side, 22,200 is likely to be a critical hurdle, experts said.

The Nifty 50 opened lower and tested an intraday low of 21,917, but rebounded in the afternoon and hit a day's high of 22,124 amid volatility. The index finally settled at 22,056, up 32 points and formed a small bullish candlestick pattern with upper and lower shadows on the daily charts, indicating the range-bound action in the market after the sharp selloff of March 13.

"The immediate support of 21,900 has been tested in the last four sessions, but the market has failed to show any meaningful upmove from the support. This may not be a good sign for the bulls at the highs," Nagaraj Shetti, senior technical research analyst at HDFC Securities said.

He feels a decisive break below the support of 21,900-21,850 is likely to drag Nifty down to 21,500 levels quickly. "Any upside bounce from here could encounter a strong hurdle around 22,200 levels," he said.

On the weekly options front, the 23,000 strike owned the maximum Call open interest followed by the 22,500 and 22,200 strike with meaningful Call writing at the 22,700 strike, and then 22,200 and 22,500 strikes, while on the Put side, the maximum open interest was seen at 21,000 strike followed by 22,000 strike and 21,800 strike with writing at 21,900 strike and then 21,500 strike.

The above options data also indicated that the 21,900-21,800 zone is expected to be the crucial support area for the Nifty 50 with resistance at 22,200 on the higher side.

Bank Nifty

The Bank Nifty continued lower highs and lower lows formation as well as a downtrend for the seventh consecutive session. The banking index has formed a small bullish candlestick pattern with a long lower shadow on the daily charts, indicating buying interest at lower levels.

The index tested an intraday low of 46,022 in the morning amid selling pressure but recovered smartly in the second half as buyers stepped in at lower levels and closed just 18 points lower at 46,576.

"Sentiment may improve in the near term, given that the index closed above the resistance of 46,500. Looking ahead, if the index surpasses 46,750, it could potentially move towards 47,000 and beyond in the short term," Rupak De, senior technical analyst at LKP Securities said.

On the downside, support is situated in the 46,500-46,300 zone, he feels.

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