Technical View: Nifty rebounds but needs sustainable close above 25,250 for upward journey, consolidation may continue until then

Nifty Outlook

The Nifty 50 rebounded after two days of correction, registering half a percent gains on July 21, while defending the 24,900 level, which coincides with the 50-day EMA and the lower line of Bollinger Bands on a closing basis. The formation of lower highs and lower lows continued, but if the index consistently holds this level, the upward journey toward 25,250 is possible. This level is crucial for further upside, as it would negate the lower highs-lower lows formation. However, as long as the index trades below 25,250, consolidation and range-bound trading may continue, according to experts.

The Nifty 50, after witnessing volatility in early trades, gained strength and remained bullish for the rest of the session. It finished at 25,091, up by 122 points, and formed a bullish candle with a lower shadow on the daily charts. This indicates a pullback rally after the downside breakout of immediate support at the 25,000 level on Friday.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the negative chart pattern (lower highs and lower lows) continued on the daily chart, and Monday’s swing low of 24,882 could be considered as a new lower low of the pattern. Hence, any further upside could be viewed as a sell-on-rise opportunity, he advised.

He also stated that the short-term trend of the Nifty remains weak, but a decisive move above the key resistance level of 25,250 is likely to negate the bearish sentiment in the near term. Any weakness from the lower highs could revisit the recent swing low of 24,882 levels, he noted.

The weekly options data indicated that the Nifty 50 is expected to trade within a range of 24,900-25,200 in the immediate term.

The maximum Call open interest was seen at the 25,100 strike, followed by the 25,500 and 25,200 strikes, with the maximum Call writing at the 25,600 strike, then the 25,500 and 25,700 strikes. On the Put side, the 25,000 strike holds the maximum open interest, followed by the 24,900 and 25,100 strikes, with the maximum Put writing at the 25,100 strike, followed by the 25,000 and 24,900 strikes.

Bank Nifty

The Bank Nifty outperformed the benchmark Nifty 50, soaring 670 points (1.2%) to 56,953. The index climbed above the 20-day EMA (56,770) and formed a bullish candle with a lower shadow on the daily timeframe, indicating buying interest at lower levels. It also defended the previous day’s low and tested the midline of the Bollinger Bands.

The rally was primarily driven by heavyweight constituents like ICICI Bank and HDFC Bank.

Going ahead, “The zone of 56,600-56,500 will act as immediate support for the index. On the upside, the zone of 57,100-57,200 will act as a crucial resistance for the index,” said Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, adding that any sustainable move above 57,200 will lead to an extension of the pullback rally up to the 57,600 level.

Meanwhile, the India VIX, the fear index, fell by 1.67 percent to 11.20, marking its lowest closing level since April 26, 2024. This signals stability in the market, but major moves in either direction cannot be ruled out.