Technical View: Nifty takes breather but ongoing bullish momentum may drive index toward 25,500 with weakening VIX

Nifty Rangebound

The Nifty 50 closed moderately lower amid rangebound trading on May 16, as bulls took a breather following an outstanding performance in the previous session. However, momentum remains strong, given healthy technical indicators, with the index trading above all key moving averages across major timeframes and closing near the upper line of the Bollinger Bands.

Even the momentum indicators continued to signal an uptrend, with the RSI above the 60 mark at 65.29, and the MACD sustaining its positive crossover with a further improving histogram. Hence, experts expect the Nifty 50 to inch toward 25,300 (the 78.6 percent Fibonacci retracement of 26,277–21,744), followed by 25,500 as a key resistance. However, support is placed at 24,800, and then 24,500, as a breach below this level may open the door to selling pressure.

The Nifty 50 opened flat and remained within a 100-point range before closing 42 points lower at 25,020, forming a small red candle with a lower shadow on the daily chart, following a long bullish candle in the previous session.

This market action suggests a breather-type pattern after a stellar rally, which is expected to be a continuation pattern within the uptrend, according to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the underlying trend of the Nifty remains positive. "The next overhead resistances to watch are around 25,250 and 25,500 levels in the coming weeks. Any dips from here could find support around 24,800 levels," Nagaraj said.

For the week, the index surged 4.2 percent—its biggest weekly gain since the week ended April 18—forming a long bullish candle on the weekly timeframe, signalling continued strength.

The maximum Call open interest is at the 26,000 strike, which is expected to be a strong resistance in the short term, followed by the 25,500 and 25,000 strikes. Maximum Call writing was seen at the 25,500 strike, followed by the 26,000 and 25,100 strikes.

On the Put side, the 25,000 strike holds the maximum open interest, serving as immediate support, followed by the 24,500 and 24,700 strikes. Maximum Put writing is at the 25,000 strike, followed by the 24,700 and 24,800 strikes.

The Bank Nifty remained rangebound for the fifth consecutive week, with stiff resistance at the 55,500 zone. A decisive breakout above this level could push the index toward the 56,000–56,100 range.

The index gained 3.3 percent during the week but traded within the previous day's range and closed flat on Friday at 55,355, forming a small bullish candlestick pattern with minor upper and lower shadows on the daily timeframe—indicating consolidation.

"The high of the mother candle at 55,491 now acts as a key resistance. Fresh longs are recommended only on a breakout above this level, which could pave the way toward a new all-time high," said Anshul Jain, Head of Research at Lakshmishree Investments.

On the downside, support has shifted higher to 55,200 and 55,000, he added. Traders should watch for volume confirmation on a breakout for a momentum-based entry, he advised.

Meanwhile, the India VIX, the fear index, continued its downward trajectory throughout the week, falling 2.03 percent to 16.55 on Friday, and recording a 23.49 percent correction for the week, further supporting bullish sentiment.