Technical View: Nifty could see further rally only after decisive close above 23,400, Bank Nifty reclaims 10-day EMA

Nifty Technical Trend

The Nifty 50 started off the week on a positive note, rising six-tenths of a percent on January 20. Overall, the index has remained in the range of the 23,100-23,400 zone for the last five days. The upper end of the range somewhat coincides with the 50-week EMA and the 10-day EMA. Hence, a decisive close above 23,400 could open the doors for 23,570 (20-week EMA) and the 200-day EMA (23,670). Until then, consolidation may continue with support at 23,100, according to experts.

After initial volatility, the Nifty 50 gained strength and hit an intraday high of 23,391 in afternoon trade. The index finished the session at 23,345, up 142 points, and formed a bullish candlestick pattern with a long lower shadow on the daily charts, indicating buying interest at lower levels.

"On the technical front, the Nifty continues to consolidate near its crucial support zone of 23,400-23,100. Monday's close above 23,300 has strengthened short-term bullish sentiment," Mandar Bhojane, Research Analyst at Choice Broking, said.

According to him, a breakout above 23,400 could set the stage for a rally toward 23,600 and 23,800, supported by improving buying momentum as indicated by the RSI at 41.34. However, a downside breach below 23,100 could lead to declines toward 22,800 and 22,600, he added.

On the options front, the maximum Call open interest was seen at the 24,000 strike, followed by the 24,500 and 23,600 strikes, with maximum Call writing at the 24,400 strike, followed by the 23,600 and 24,000 strikes. On the Put side, the 23,000 strike holds the maximum open interest, followed by the 23,200 and 22,500 strikes, with maximum Put writing at the 23,000 strike, followed by the 23,200 and 23,300 strikes.

The weekly derivative data indicated that the Nifty may be in the range of 23,000-24,000 levels, with immediate support at 23,200 and resistance at the 23,600 level.

Bank Nifty

The Bank Nifty finally closed above the 10-day EMA (49,274) for the first time since January 2, rising 810 points (1.67 percent) to 49,351 and forming a bullish candlestick pattern on the daily charts with above-average volumes and a higher high-higher low formation.

For this rally to sustain and trigger short-covering, the banking index must hold above 49,475. If achieved, it could propel the index toward the 50,200 mark, supported by momentum from short-covering, Anshul Jain, Head of Research at Lakshmishree Investments, said.

According to him, on the downside, immediate support is placed at 49,050. This setup highlights strong bullish sentiment, setting the stage for a potential breakout if key levels are maintained, he added.

Meanwhile, the volatility index, India VIX, extended its upward journey, rising 4.24 percent to 16.42, which is not the favourable zone for bulls. Hence, the bulls need to be cautious.