Technical View: Decisive close above 23,500 needed for further bull run in Nifty, Bank Nifty hits February swing high

Nifty in control of Bulls

The bulls maintained their strong hold over Dalal Street throughout the week ended March 21, driving the benchmark Nifty 50 higher by 4.26 percent, marking the best weekly performance since the first week of February 2021 (when it was up 9.46 percent). Meanwhile, India VIX dropped to a fresh five-and-a-half-month low.

The index formed a robust bullish candlestick pattern on the weekly charts, signaling strong momentum. However, according to experts, the index needs to decisively surpass 23,500 (which coincides with the midline of the Bollinger Bands) for a further bull run. Until then, rangebound trading with a key support level of 23,000 cannot be ruled out.

The index continued its higher highs-higher lows formation for the second consecutive week. On Friday, there was initially some minor profit booking, but the market quickly rebounded and extended its upward journey as the day progressed. It finished the session at 23,350, up 160 points (0.7 percent), and formed a long bullish candlestick on the daily timeframe, staying above the Bollinger Bands. However, it could not manage to hold on to the intraday high of 23,403, which coincides with the 200-day EMA. The trading volume remained above average for the last three sessions.

Momentum indicators also showed a strong trend, with the RSI (Relative Strength Index) climbing to the 66.3 zone and the MACD (Moving Average Convergence Divergence) jumping above the zero line.

On daily and intraday charts, the Nifty 50 is holding a higher bottom formation, supporting further upward movement from the current levels. Hence, Amol Athawale, VP – Technical Research at Kotak Securities, is of the view that the short-term market texture is bullish.

However, due to temporary overbought conditions, some profit booking could be possible at higher levels, he added. For traders, buying on dips and selling on rallies would be the ideal strategy, he advised.

In the near future, according to him, 23,100 and the 50-day SMA or 23,000 would act as key support zones, while 23,500-23,700 could be the key resistance areas for the bulls. However, he mentioned that "if it falls below 23,000, the sentiment could change, and traders may prefer to exit from their long positions."

According to the monthly options data, the maximum Call open interest was observed at the 24,000 strike, which is expected to be a crucial resistance zone, followed by the 24,100 and 23,600 strikes. The maximum Call writing was seen at the 24,100 strike, followed by the 23,600 and 24,200 strikes.

On the Put side, the 23,000 strike holds the maximum open interest, indicating the key support zone in the short term, followed by the 22,500 and 23,200 strikes, with the maximum writing at the 23,000 strike, followed by the 23,300 and 23,200 strikes.

Bank Nifty

The Bank Nifty outperformed the benchmark Nifty 50 on the last day of the week, rising 531 points (1.06 percent) to close at 50,594, surpassing the February swing high (of 50,642) intraday and signaling robust momentum ahead. It was the highest closing level since January 3. The index reported a long bullish candlestick pattern on the daily charts and sustained an upward trend, maintaining a higher highs-higher lows formation for seven consecutive sessions with above-average volumes.

The banking index surged 5.27 percent during the week, marking its biggest weekly gains since the week ended December 8, 2023. It formed a strong bullish candle on the weekly scale, decisively surpassing the midline of the Bollinger Bands, signaling the possibility of a healthy run ahead.

"The next major resistance for the index is near 50,650, which is around its previous swing high (February). A sustained move above 50,650 could trigger a fresh breakout in Bank Nifty," said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C Mehta Investment Intermediates. He advised traders to adopt a buy-on-dips strategy.

Meanwhile, the India VIX, a measure of market volatility, hit a fresh five-and-a-half-month low, falling 0.22 percent to 12.58, the lowest closing level since October 1, 2024, making the trend more favourable for the bulls. It was down 5.31 percent for the week, continuing its downtrend for the fifth consecutive week.