Technical View: Convincing consolidation breakout lifts hopes of Nifty’s move toward 26,500; Bank Nifty targets above 61,000

Nifty outlook for January 5

• On the weekly charts, the benchmark index rose 1.1 percent and formed a bullish candle with a lower shadow, indicating a healthy trend with strong buying interest at lower levels.

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The Nifty 50 as well as the Bank Nifty staged a stellar performance on January 2, witnessing a convincing consolidation breakout and ending at new record closing highs, supported by momentum indicators aligning with the rally. Both indices extended their uptrend for the third and fourth consecutive sessions, respectively. This strong upside momentum fueled hopes that the rally may continue in the short term, with the Nifty 50 inching toward the 26,500–27,000 range and the Bank Nifty moving beyond the 61,000 zone ahead of the December quarter earnings season, which begins next week.

After initial volatility, the Nifty 50 picked up momentum and maintained its upward journey throughout the session, hitting an intraday record high of 26,340 in late trade. The index finished at a new record closing high of 26,329, up 182 points, or 0.70 percent, and formed a long bullish candle on the daily charts, indicating a decisive breakout from the recent consolidation phase, which is a positive development.

On the weekly charts, the benchmark index rose 1.1 percent and formed a bullish candle with a lower shadow, indicating a healthy trend with strong buying interest at lower levels.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the underlying trend of the Nifty is sharply upward. “The next upside target to be watched over the next one to two weeks is around 26,750 (the 61.8 percent Fibonacci extension, taken from the swings of the April low to June high and the August low). Immediate support is placed at 26,200,” he said.

Further, the index is trading above all key short- and long-term moving averages, keeping the broader trend firmly positive. The MACD has generated a fresh buy crossover on the daily timeframe, while the RSI has moved above the 60 mark, signalling strengthening momentum.

“With the base now shifting higher to the 26,100 zone, the upside appears open towards 26,500 levels in the near term,” said Nilesh Jain, Head – Technical and Derivatives Research Analyst (Equity Research) at Centrum Broking.

Weekly options data also indicated that the Nifty 50 is expected to march toward the 26,500–27,000 range, with support placed in the 26,200–26,000 zone.

The maximum Call open interest was seen at the 27,000 strike, followed by the 26,500 and 26,600 strikes, with the maximum Call writing at the 26,500, 27,000, and 26,650 strikes. Meanwhile, the 26,000 strike holds the maximum Put open interest, followed by the 26,200 and 26,100 strikes, with the maximum Put writing at the 26,300, 26,200, and 26,250 strikes.

Bank Nifty

The Bank Nifty maintained its uptrend and finally achieved a new all-time high of 60,204 after a month since its previous record high. The index closed above the upper Bollinger Band with above-average volumes, raising hopes for a continuation of the rally.

The banking index rallied 439 points, or 0.74 percent, to 60,151 and formed a long bullish candle on the daily timeframe.

For the week, the index surged 1.93 percent and formed a strong green candle resembling a bullish flag-and-pole pattern breakout on the weekly charts, signalling the possibility of a robust run ahead despite any intermittent consolidation.

On the daily charts, the index is trading well above all key moving averages, with short-term moving averages trending upward and expansion visible in the Bollinger Bands. The RSI jumped to 67.55, while the MACD generated a fresh buy crossover, with the histogram climbing above the zero line, signalling increasing momentum.

“With confirmation of a bullish flag-and-pole pattern breakout, the index signals a conservative target around 61,500, followed by 62,500 in the near term,” said Nilesh Jain of Centrum Broking, adding that immediate support is placed at the 21-day DMA near the 59,300 level.

Furthermore, rollover data indicates relatively stronger momentum, with rollovers rising to 77.46 percent, marginally above the three-month average. Based on these indicators, the Bank Nifty is likely to continue outperforming the Nifty index in the near term, Jain believes.

Meanwhile, India VIX, the fear gauge, remained below all key moving averages and near the lower zone, signalling a favourable trend for bulls. The index closed at 9.45, up 2.89 percent on Friday and 3.28 percent for the week.