Technical View: Rangebound trade may sustain until Nifty holds 23,000 support, elevated VIX signals caution for bulls

Nifty Downtrend

The Nifty 50 snapped its two-day winning streak and closed half a percent down on January 24. The index climbed above the 10-day EMA (23,240) and neared the 23,350 zone, but could not sustain both levels on a closing basis, forming a bearish candlestick pattern with a long upper shadow on the daily timeframe. This suggests consistent pressure at higher levels.

From here on, 23,000 is likely to act as crucial support, as the index has been holding this level well during the current fall. If it decisively breaks 23,000 on a closing basis, then 22,800 (the low of the big green candle from June 7 last year) could be a potential level to watch on the downside. However, if it stays above 23,000, the index may again march toward the 23,350-23,400 zone amid consolidation, experts said.

The Nifty 50 opened lower at 23,184 and saw a 300-point range during the day, before closing at 23,092, down 113 points. For the week, it was down half a percent and formed a bearish candlestick pattern with minor upper and lower shadows, following a Doji candle in the previous week.

According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the bearish pattern of lower tops and bottoms continues on the daily chart, and Friday's high of 23,347 could now be considered a new lower top in the pattern.

Hence, the near-term trend for Nifty remains weak. He added that a slide below the immediate support of 22,975 could open the next downside toward 22,800. Any upside bounce toward the 23,350-23,400 zone could be seen as a sell-on-rise opportunity, he advised.

As per the derivative data, the maximum Call open interest was seen at the 24,000 strike, followed by the 23,500 and 23,800 strikes, with maximum Call writing at the 24,000 strike, and then the 23,500 and 23,300 strikes. On the Put side, the 22,000 strike holds the maximum open interest, followed by the 23,000 and 22,500 strikes, with maximum writing at the 22,000 strike, and then the 22,100 and 22,800 strikes.

The above monthly options data indicates that Nifty may remain in the broad range of 22,000-24,000, with immediate support at 23,000 and resistance at 23,300.

Bank Nifty

The Bank Nifty also showed similar behaviour, falling 221 points to 48,368 and forming a bearish candlestick pattern with a long upper shadow and minor lower wick on both the daily and weekly timeframes, indicating pressure at higher levels. For the week, it was down 0.36 percent.

"Bank Nifty on a daily scale has formed a red candle, indicating weakness. However, the index defended the support at 48,000. If the index holds the 48,000 level, a pullback rally toward 49,000-49,500 could be possible," said Hrishikesh Yedve, AVP of Technical and Derivatives Research at Asit C Mehta Investment Intermediates.

On the flip side, sustaining below the 48,000 level could extend further weakness, he added.

Meanwhile, the volatility index, India VIX, remained elevated, rising 0.3 percent to 16.75 after a two-day decline, making bulls cautious ahead of the Union Budget next week.

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