Technical View | Nifty beyond 20,000 looks possible, but sustainability needs to be watched

Stock Market

We have seen an unstoppable run from the bulls this week as the relentless buying has helped the Nifty50 get very close to the 20,000 mark on July 20, the weekly expiry day. Banking & financial services, FMCG and index heavyweight Reliance Industries (RIL) played a key role.

The Nifty50 opened flat at 19,832 and hit a day's low of 19,758 amid morning consolidation. However, the index gained strength during late morning deals and smartly extended its northward journey in the later part of the session to hit a fresh all-time high of 19,991.85 in late trade. The index finally ended at a record closing high of 19,979, up 146 points.

The index has formed a long bullish candlestick pattern on the daily charts, with continuing higher highs and higher lows formation for the sixth consecutive session which is a positive sign. The momentum indicators RSI (relative strength index) and MACD also looked bullish.

Hence, the Nifty50 can easily surpass the 20,000 mark in the coming session with support at 19,800-19,700 levels, but the sustainability over 20,000 needs to be closely watched, experts said, adding if the index stays above the 20,000 mark then there could be a possibility of further rally towards 20,500 levels in coming weeks.

"A long bull candle was formed on the daily chart with a minor lower shadow. Technically, this market action indicates sharp upside momentum for the market. Though Nifty is placed at the highs, there is no sign of any tiredness or reversal pattern building at the new highs. Hence, one may expect further upside in the short term," Nagaraj Shetti, technical research analyst at HDFC Securities said.

"The next crucial upside resistance to be watched is around 20,450, which is a 100 percent Fibonacci projection taken from important bottom-top-bottom as per the weekly chart. Immediate support is at 19,850 levels," Nagaraj said.

Option data also indicated that 20,000 is likely on the Nifty50 soon given the strong Call open interest and writing, but there is no Call writing beyond the 20,000 strike, hence whether there is a profit booking or consolidation after hitting the psychological mark needs to be watched. If there is any consolidation, then it may be between 20,000-19,700 levels.

On the weekly Options front, we have seen maximum Call open interest at 20,000 strike, followed by 20,100 strike and 20,300 strike, with meaningful Call writing only at 20,000 strike, whereas the maximum Put open interest was at 19,900 strike, followed by 19,700 & 19,800 strikes, with Put writing at 19,900 strike, then 20,000 strike.

Bank Nifty

Bank Nifty played a crucial role in today's trade, helping the Nifty50 get closer to the 20,000 mark. Even Bank Nifty itself surpassed the 46,000 mark for the first time and hit a fresh record high of 46,256 as the bulls are dominating the market.

The index settled at 46,187, up 518 points and formed a long bullish candlestick pattern on the daily charts.

"The index successfully surpassed the key resistance level of 46,000, indicating a continuation of the upward momentum. The index is characterized by a series of "higher high and higher low formations," which is a bullish pattern that confirms the strength of the uptrend," Kunal Shah, senior technical & derivative analyst at LKP Securities said.

He feels the support level for the index is at 45,500, and as long as this level remains intact on a closing basis, the overall trend remains bullish.

"A break below this support level could signal a potential shift in momentum and may warrant caution for bulls. On the upside, the next immediate hurdle is placed at the 46,400-46,500 zone. If the index manages to break above this resistance zone on a closing basis, it could further accelerate the upward movement, potentially opening room for higher levels," he said.

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