Technical View: Further rally possibly for Nifty only on decisive close above 23,400, VIX hits 6-month high

Nifty Uptrend

The Nifty 50 extended its upward journey for second consecutive session on January 29 and closed above the 10-day EMA of 23,134 for the first time since January 3, signaling some strength. However, considering the continuation of chart patterns like lower highs-lower lows and the increasing VIX, bulls need to be cautious, as the market still seems to be in a "sell on rally" mode. The next hurdle on the higher side will be 23,300 (20-day EMA) and 23,400 (the high of the big red candle of January 21). On the lower side, 23,000-22,975 can act as a support zone, experts said.

The Nifty 50 opened higher at 23,027 and remained in an uptrend amid volatility throughout the session. The index finished near the day's high at 23,163, up 206 points or 0.90 percent, and formed a bullish candlestick pattern on the daily charts, with higher highs and higher lows for another session.

The chart pattern is indicating a sign of strength in the upside bounce. "The negative chart pattern, like lower tops and bottoms, is still intact. A sustainable move above the next hurdles of around 23,350-23,400 levels could possibly negate this bearish pattern and also open more upside ahead," Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, said.

According to him, the immediate support is placed at the 23,000 level.

The monthly options data indicated that the Nifty is likely to trade in the range of 22,500-24,000 in the short term, with immediate support at 23,000 and resistance at the 23,500 zone.

On the Call side, the maximum open interest was seen at the 24,000 strike, followed by the 23,000 and 23,500 strikes, with maximum Call writing at the 23,150 strike, then at the 23,600 and 23,800 strikes. On the Put side, the 23,000 strike holds the maximum open interest, followed by the 22,000 and 22,500 strikes, with maximum Put writing at the 22,500 strike, then at the 23,100 and 23,000 strikes.

Bank Nifty

The Bank Nifty also traded higher for another session with above-average volumes and sustained above the 10-day EMA of 48,826, which is a positive sign. The banking index closed above the 49,000 mark for the first time since January 20, climbing 299 points to 49,166 and forming a bullish candlestick pattern with a lower shadow on the daily charts, indicating buying interest at lower levels.

The index now faces resistance at the monthly VWAP (volume-weighted average price) of 49,200. A decisive move above this level will trigger aggressive short covering, pushing prices toward the key swing high of 49,650, Anshul Jain, Head of Research at Lakshmishree Investments, said.

Notably, according to him, the failed breakdown of the two-week low strengthens the bullish case. Traders should watch for sustained momentum above 49,200, as it could lead to a rapid upside move, he advised.

Meanwhile, the India VIX, the fear gauge, continued its upward journey as the market approaches the Budget, making bulls more cautious ahead of this big event. The Volatility Index rose by 2.45 percent to 18.64, the highest closing level since August 6, continuing its uptrend for the fourth consecutive session.