Technical View: Momentum seems back for Santa rally, may drive Nifty 50 toward record high; Bank Nifty breaks above resistance trendline

Nifty outlook for December 23

The Nifty 50 witnessed follow-through buying interest and rallied more than 200 points after a gap-up opening on December 22, marking a healthy start to the holiday-shortened week. The continuation of the higher high–higher low formation, along with a bullish move in momentum indicators and the index climbing above all key moving averages, has raised the possibility of a record-high run and a Santa rally in the upcoming sessions.

According to experts, if the benchmark Nifty 50 decisively clears the 26,200 hurdle, a march toward the record high of 26,326 (recorded on December 1) could be possible. However, the 26,000 level, which coincides with the midline of the Bollinger Bands, is expected to act as an immediate key support area.

The Nifty 50 opened higher at 26,056 and maintained a positive trend throughout the session. The index extended its rally as the session progressed and hit an intraday high of 26,181 before closing 206 points, or 0.79 percent, higher at 26,172.

The index has formed a long bullish candle on the daily timeframe, climbing above all key moving averages and the midline of the Bollinger Bands, with short-term moving averages trending upward. The RSI climbed to 58.56, while the Stochastic RSI maintained a bullish crossover. The MACD inclined upward toward the reference line, with histogram weakness fading further. All these indicators point to increasing bullish momentum.

“Today’s market action indicates a decisive breakout of a crucial hurdle and a triangle pattern around the 26,000 level. This is a positive indication and reflects a significant change in the market trend on the upside,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the next upside levels to be watched are around the 26,300–26,400 range in the near term. Immediate support is placed at 26,000.

Weekly options data suggested immediate resistance for the Nifty 50 at the 26,200–26,300 zone, with support seen in the 26,100–26,000 range. The maximum Call open interest was placed at the 26,200 strike, followed by the 26,300 and 26,150 strikes, with maximum Call writing at the 26,150, 26,300, and 26,200 strikes. On the Put side, the 26,100 strike held the maximum open interest, followed by the 26,000 and 25,900 strikes, with maximum Put writing at the 26,100, 26,150, and 26,000 strikes.

The Bank Nifty also participated in the uptrend, rising 235 points, or 0.4 percent, to 59,304, but underperformed the benchmark Nifty 50 despite a positive opening. The index climbed above short-term moving averages (10- and 20-day EMA) as well as the midline of the Bollinger Bands. Additionally, the index witnessed a breakout above the falling resistance trendline, while momentum indicators also appeared to be aligning with the trend.

The RSI rose to 56.08 and is on the verge of a positive crossover, while the Stochastic RSI turned bullish. Histogram weakness faded further, although the MACD continued to remain below the reference line.

The Bank Nifty index has formed a small green candle and managed to close above the high of the previously formed hammer candle. “The next resistance for the index is placed near 59,550, and a sustainable break above this level could pave the way for a move toward the 59,800–60,000 levels,” said Hrishikesh Yedve, AVP – Technical and Derivative Research at Asit C Mehta Investment Intermediates. The 58,700 level is expected to act as key support for the banking index.

Meanwhile, India VIX, the fear index, snapped a four-day losing streak and rose 1.6 percent to 9.67. However, it continued to remain near lower zones and well below all key moving averages, keeping bulls in a comfort zone.