Technical View: Nifty needs to clear 22,850 hurdle for further upward journey amid likely volatility

Nifty Uptrend

The Nifty 50 rebounded smartly after a day of tariff-led bloodbath, clocking 1.7 percent gains on April 8, partly driven by short-covering, value buying, and a rally in global counterparts. The index snapped a three-day fall, accompanied by above-average volumes, which is positive.

According to experts, if the index manages to rally further, the 22,850 level is the key hurdle (the upper end of the bearish gap from April 7), as a break above it could indicate that a strong uptrend is likely. Until then, volatility may persist in the market, with the crucial support at 22,000.

The benchmark index touched an intraday high of 22,697 and a low of 22,271, after opening higher at 22,447. The index finished at 22,536, up 374 points, and formed a bullish candlestick pattern with both upper and lower shadows, resembling a High Wave-like pattern, signaling ongoing high volatility in the market.

The recent sharp opening downside gap from Monday has been challenged and partially filled. "As per the gap theory, the said down gap could be considered a bullish exhaustion gap, and it is likely to be filled soon around the 22,850 level on the higher side. Normally, bullish exhaustion gaps are more often associated with important bottom reversals," said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the immediate support is placed at 22,270.

The options data suggested that the Nifty may trade within the range of 22,000-23,000 in the short term, as decisively breaking either side of the range could provide a firm direction to the market.

As per the weekly options data, the maximum Call open interest was observed at the 23,500 strike, followed by the 23,000 and 23,300 strikes, with the maximum Call writing at the 23,400 strike, followed by the 23,500 and 23,300 strikes. On the Put side, the 22,500 strike holds the maximum open interest, followed by the 22,000 and 22,200 strikes, with the maximum Put writing at the 22,500 strike, followed by the 22,400 and 22,300 strikes.

Bank Nifty

The Bank Nifty also witnessed volatility and closed 651 points (1.3 percent) higher at 50,511, following a day of sharp correction. With Tuesday's rebound, the index moved back above the 20, 50, 100, and 200-day EMAs, which is positive.

It formed a long-legged Doji-like candlestick pattern on the daily timeframe, signaling indecision, but managed to close above the previous day's high, indicating underlying strength.

According to Anshul Jain, Head of Research at Lakshmishree Investments, the immediate upside target is placed at the upper end of the gap-fill zone near 51,360.

However, "the monthly VWAP (volume-weighted average price), which aligns with the 8-day EMA at 50,950, may act as a supply zone. Some profit booking can be expected around this level before any continuation of the upmove. Bulls need to defend 50,950 for momentum to stay intact," he said.

Meanwhile, the India VIX, which measures expected market volatility, remained in the higher zone, although it fell by 10.31 percent to finish at 20.44 on Tuesday. It needs to fall below the 14 mark for the bulls to become strongly active; until then, bulls need to proceed with caution.