Technical View: Strengthening momentum indicators and falling VIX point to Nifty’s move toward 26,000; Bank Nifty defends trendline support

Nifty outlook for February 5

• Weekly options data indicated 26,000 as a resistance zone for Nifty 50
• Nifty's crucial support likely at 25,500
• India VIX maintained downward journey, signalling comfort for bulls

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The benchmark Nifty 50 maintained its upward journey for the third consecutive session amid volatility and range-bound trading, rising two-tenths of a percent on February 4. The index not only defended the 50-day EMA and the previous day’s low on a closing basis, but also received support from momentum indicators, which have started aligning with the market uptrend, and from the VIX, which sustained its downtrend.

Further, the index traded well above all key moving averages; in fact, the short-term moving averages trended upward since the previous session. It also defended 25,685 (the 61.8 percent Fibonacci retracement of the recent fall from the January high to the February low).

Hence, the Nifty 50 is likely to march toward 26,000, the key resistance zone (which coincides with the 78.6 percent Fibonacci retracement), in the upcoming sessions, while support is placed at the 50-day EMA (25,650), followed by crucial support at 25,500 (which coincides with the 20 DEMA and 20 DMA), experts said.

The Nifty 50 recovered after opening lower at 25,675 but could not sustain those gains and fell to 25,564 during the morning session. The index regained strength in the last couple of hours of trade and ended at 25,776, up 48 points (0.19 percent), though there was some profit booking in late trade.

The index formed a bullish candle with a long lower shadow on the daily charts, indicating buying interest at lower levels. Meanwhile, the India VIX also maintained its downward journey, falling 4.98 percent to 12.25 and slipping below short-term moving averages and the 200-day EMA, signalling comfort for bulls and easing uncertainty.

“The huge opening upside gap of Tuesday remains intact and partially filled. The underlying short-term trend of the Nifty continues to be positive,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

According to him, the next upside hurdles to watch are around 26,000 and then 26,350 levels in the near term. Immediate support is placed at 25,600.

The MACD maintained a positive crossover (though below the zero line), with a further uptrend in the histogram, while the RSI rose further to 54.61, signalling a healthy trend.

The weekly options data also indicated 26,000 as a resistance zone for the Nifty 50 (where the maximum Call open interest is placed), followed by immediate resistance at 25,800. However, 25,500, where the maximum Put open interest is observed, is likely to be a crucial support.

Bank Nifty

The Bank Nifty also traded higher for the third straight day, rising 197 points (0.33 percent) to finish at 60,238.15 after trading within the previous day’s range and holding the falling resistance trendline support. The index formed a small bullish candle with upper and lower shadows on the daily timeframe, indicating volatility and consolidation after the recent move.

In the follow-up session, the index sustaining above the 60,000 mark reflects underlying strength. “The overall chart structure remains bullish, favouring a buy-on-dip strategy as long as the index holds above its short-term crucial 20-day and 50-day moving averages,” said Vatsal Bhuva, Technical Analyst at LKP Securities.

Additionally, the RSI has closed above its falling trendline resistance, while the MACD climbed above the zero line with a positive crossover, and the histogram showed its first green candle since January 8, supporting positive momentum.

The immediate support is placed at 59,800, while resistance is seen near 60,800 levels, Vatsal said.