Technical View: Nifty bulls break above key EMAs, eyeing 25,200; Bank Nifty trendline breakout above 56,000 points to further rally

Nifty outlook for October 07

The Nifty 50 staged a spectacular performance on October 6, decisively surpassing the 25,000 zone and marking a healthy start to the week, backed by banks and technology stocks ahead of the quarterly earnings season kicking off later this week.

The index climbed above short- and medium-term moving averages, as well as the midline of Bollinger Bands, accompanied by an improvement in momentum indicators, signaling confidence among traders.

The index also completed a 50 percent Fibonacci retracement of the recent fall from the September high of 25,450 to the low of 24,588, which comes just above the 25,000 mark—this is a positive development.

Hence, according to experts, the Nifty bulls are expected to target the 25,200-25,250 zone, followed by 25,450-25,500 as crucial resistance levels. However, the immediate support is placed at 24,900, followed by 24,800-24,750.

After initial volatility, the Nifty 50 gained strength as the day progressed and hit an intraday high of 25,096 in late trade, rising by 183 points (0.74 percent) to close at 25,078. The index formed a long bullish candle on the daily charts, continuing the uptrend and maintaining a higher high-higher low structure for the third consecutive session.

The RSI jumped to 55.26 with a bullish crossover, while the histogram weakness faded further. The MACD maintained a negative crossover, though it inched higher, signaling a potential positive crossover.

"The support base has shifted higher, with major support now established around the 24,800 level. Momentum indicators and oscillators have begun to strengthen, suggesting a continuation of the upward move," said Nilesh Jain, Head – Technical and Derivatives Research Analyst (Equity Research) at Centrum Broking.

If the index sustains above the 25,020 mark, a further rally towards 25,500 in the October series appears likely, he believes.

Weekly options data suggested that the Nifty 50 may face a hurdle at the 25,200-25,500 range, with support at 24,900.

The maximum Call open interest was placed at the 25,100 strike, followed by the 25,200 and 25,500 strikes. The maximum Call writing was at the 25,200, 25,100, and 25,300 strikes. Meanwhile, the 25,000 strike holds the maximum Put open interest, followed by the 24,900 and 24,500 strikes, with the maximum Put writing at the 25,000, 25,050, and 24,950 strikes.

Bank Nifty

The Bank Nifty continued to support the market, rising by 516 points (0.93 percent) to close at 56,105. The banking index saw a decisive breakout above a falling resistance trendline with a gap-up opening and hit the upper Bollinger Band, signaling a positive trend.

Adding to the bullish setup, Bank Nifty surged past its prior swing high of 55,835, registering its highest closing level since July 30. The index is now comfortably trading above its key moving averages, reinforcing the strength of the ongoing rally.

Momentum indicators are also supportive. The daily RSI has climbed above the 60 mark to 63.42 and remains on an upward trajectory, while the MACD maintained a bullish crossover with further strength in the histogram, suggesting increasing buying strength.

Given this constructive chart structure, the banking index appears poised to continue its northward journey, with 56,600 as the immediate upside target, followed by 57,000 in the short term. On the downside, the support zone of 55,700-55,600 is expected to cushion any pullbacks, said Sudeep Shah, Head - Technical Research and Derivatives at SBI Securities.

Meanwhile, the India VIX, the fear index, remained below its short-term moving averages, though it snapped a four-day fall and gained 1.32 percent to 10.19. This remains supportive for bulls.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.