The Nifty50 maintained upward journey throughout the session, though there was some profit taking in last hour of trade on May 23. All key sectors, barring IT, supported the market, while Metal continued to shine for yet another day.
The index started the day higher at 18,363 and climbed up to 18,420 intraday, but the profit booking in last hour wiped out some gains and finally the index settled with 34 points' gains at 18,348 and formed small bodied bearish candlestick pattern with long upper shadow and small lower shadow on the daily scale, indicating selling pressure at higher levels.
But the Nifty50 continued higher highs, higher lows formation for second straight session, which is a positive sign and indicating the current consolidation may be a sign of preparation for another leg of smart rally. Hence, if the index consolidates and sustains 18,300 mark, then further upmove towards 18,500 can't be ruled out in coming sessions, with crucial support of 18,000-18,200 area, experts said.
Momentum indicators are also still indicating positive trend, with RSI (relative strength index 14) at 64 levels on the daily charts, and MACD (moving average convergence divergence) on weekly scale remaining above equilibrium line with upward bias.
"We think that since the short-term market structure is non-directional, level-based trading is the best approach for day traders. Currently, 18,300 would serve as a key support level for traders. Above that point, the sentiment will probably stay favourable," said Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.
Above 18,300, the index may rise as high as 18,450–18,500, he feels. On the other hand, selling pressure is likely to increase below 18,300 and the Nifty could decline until 18,200–18,175 below the same," he said.
As per monthly Option data, 18,400 strike owned maximum Call open interest, followed by 18,500 strike, and 18,600 strike, with Call writing at 18,400 strike, then 18,600 strike, whereas on the Put side, there was maximum open interest at 18,200 strike, followed by 18,300 strike & 18,000 strike, with writing at 18,300 strike and 18,400 strike.
The above data also indicated that the Nifty may gradually be eyeing 18,400-18,600 levels, with immediate support at 18,300 mark, then crucial support at 18,000 levels.
"Nifty is having almost equal number of sold Puts and sold Calls going into monthly expiry. For Nifty to start its next leg of up move it has to close above the 18,550 mark and sustain over there which would be its next trigger to break its all-time high," said Rahul Ghose, Founder & CEO at Hedged.
Bank Nifty
The option data indicated that, "traders are not expecting a large movement in either direction for this week's expiry for Bank Nifty," Ghose said.
Bank Nifty opened marginally positive but continued its consolidation in a narrow range of 150 points for most part of the session. The index rose 69 points to 43,954, and formed Doji sort of candlestick pattern on the daily scale, indicating indecisiveness among bulls and bears about future trend.
"It has to continue to hold above 43,750 levels for an up move towards 44,144, then 44,250 levels, while on the downside support is expected at 43,750, then 43,500 levels," said Chandan Taparia, Senior Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
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