Technical View: Further major upmove unlikely until Nifty decisively surpasses 50-day EMA

Nifty Outlook for July 31

The Nifty 50 closed with moderate gains amid a rangebound session on July 30, negating the lower highs–lower lows formation of the previous three consecutive sessions. The index also closed above the previous day's high and formed a small red candle with a lower shadow on the daily charts, following a Bullish Engulfing candlestick pattern in the prior session.

Experts suggest that for a sustained upmove, the Nifty needs to break and hold above 24,950 (50-day EMA) and 25,050 (20-day EMA). Once these levels are surpassed, the index is expected to face initial resistance at 25,250, followed by 25,350. On the downside, the zone of 24,750–24,700 is likely to act as a strong support.

On July 30, the Nifty 50 opened higher at 24,890, erased those gains to hit the day’s low of 24,772, but regained strength in the late morning and maintained an upward trajectory for the rest of the session. It eventually closed at 24,855, up 34 points.

From a technical standpoint, the MACD histogram showed waning weakness, while the Stochastic RSI displayed a bullish crossover. The RSI, at 43.25, continued to show an upward bias.

The formation of a small candle pattern on Wednesday indicates rangebound action below the immediate resistance of 24,900–25,000, which also marks a change in polarity zone, according to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

“The market is likely to break above this resistance in the coming sessions. A sustained breakout above the 24,900–25,000 levels could drive the index toward the next key resistance zone around 25,250. Immediate support, he added, is placed at 24,750,” he said.

Derivatives Data

Monthly options data suggest that the Nifty 50 may continue to trade in the 24,800–25,000 range in the near term.

On the Call side, the 25,000 strike held the maximum open interest, followed by the 25,500 and 24,900 strikes. The most significant writing was seen at the 24,900 strike, followed by 24,950 and 25,500.

On the Put side, the 24,800 strike held the highest open interest, followed by 24,700 and 24,500 strikes. The maximum writing occurred at the 24,850 strike, followed by 24,900 and 24,800.

Bank Nifty

The Bank Nifty reversed some of the previous day's losses on account of profit booking, falling 71 points to close at 56,151, after briefly hitting the hurdle at 56,300. Despite forming a bearish candle on the daily timeframe, the index defended its 50-day EMA and negated the lower tops–lower bottoms formation from the prior three sessions.

According to Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities, the support zone of 55,800–55,700 will be critical. Sustaining above this band is essential to maintain the current short-term positive bias.

On the upside, he identified the resistance zone of 56,400–56,500 as a significant barrier. A decisive and sustained breakout above 56,500 could trigger a further pullback rally, with immediate upside targets at 56,900, followed by 57,500 in the near term.

Meanwhile, the India VIX continued its downward trajectory for another session, falling 2.78% to 11.2, providing additional stability to the market.

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