Trading Plan: Will Nifty 50 extend upward journey towards 24,700, Bank Nifty climb above 50,800?

Nifty, Bank Nifty Trend

After several days of consolidation, the benchmark indices decisively surpassed the 50 percent Fibonacci retracement level (taken from the record high to the August low) and recorded a strong rally on August 16, raising hopes for the Nifty 50 moving towards the 24,700-24,800 area. If the index manages to sustain these levels, the 25,000 mark cannot be ruled out in the coming sessions. However, on the downside, the 24,400-24,300 range is likely to act as a support zone. The Bank Nifty needs to climb above 50,800 (which coincides with the 20- and 50-day EMAs) for a further rally towards 51,000, while support lies at 50,000, experts said.

On Friday, the Nifty 50 rallied 397 points or 1.65 percent to close at 24,541, and the Bank Nifty jumped 790 points or 1.6 percent to 50,517. On the NSE, 1,624 shares advanced, while 737 shares declined.

Nifty Outlook and Strategy

Rajesh Palviya, Senior Vice President Research (Head Technical Derivatives) at Axis Securities

The Nifty closed with a gain of 174 points on a weekly basis. On the weekly chart, the index has formed a small bullish candle with a lower shadow, indicating buying support around the 50-day SMA (Simple Moving Average). The chart pattern suggests that if Nifty crosses and sustains above the 24,700 level, it could witness buying, leading the index towards 24,850-25,000 levels. However, if the index breaks below the 24,450 level, it could witness selling, taking the index towards 24,200-24,000 levels.

For the week, we expect Nifty to trade in the range of 25,000-24,000 with a mixed bias. The weekly strength indicator RSI (Relative Strength Index) continues to remain flat, indicating an absence of strength. However, the momentum oscillator Stochastic has turned negative from the overbought zone, indicating a possible down move in the near term.

Key Resistance: 24,700, 24,800

Key Support: 24,350, 24,200

Strategy: Buy Nifty around 24,480 with a stop-loss of 24,380 and a target of 24,650-24,750.

Rajesh Bhosale, Technical Analyst at Angel One

The bulls are back, and it seems there’s more fuel for Nifty on the upside. In the upcoming sessions, we may see levels of 24,700 and 24,850 being tested, which could serve as immediate hurdles. If global markets remain supportive, we might even retest the 25,000 mark and beyond. Conversely, the bullish gap left around 24,200 is critical; the observations above hold as long as it is defended. However, if breached, the market may head back toward the lower levels of 24,000 and 23,900.

On Friday, the market’s gap-up opening and positive trend prompted Call writers to unwind their positions, while Put writers started adding positions in slightly out-of-the-money strikes, suggesting a base formation. The highest open interest in out-of-the-money Call options is at 25,000, with notable positions also at the 24,900 and 24,800 Call strikes. If positive momentum persists, these levels may be retested. Conversely, the highest open interest for Puts is at the near out-of-the-money strike of 24,500, indicating that bulls are pushing their base higher. Significant positions are also seen at the 24,400 and 24,300 Put strikes, highlighting key support levels.

Key Resistance: 24,680, 24,750, 24,850

Key Support: 24,500, 24,440, 24,300

Strategy: The Nifty 50 has established a structural bottom and successfully broken through the recent congestion zone. Traders should maintain a positive bias and consider adding long positions on any dips.

Vinay Rajani, CMT, Senior Technical/Derivative Analyst at HDFC Securities

Now, Call writers will have to shift their positions to the next resistance zone of 25,000-25,100. The average return for August has been muted with almost flat returns, if we consider the last 20 years of monthly performance. Month-to-date, Nifty is still down by 1.5 percent, which it would try to recoup in the coming sessions. Now, some leading indicators have turned bullish on the short-term chart of the Nifty.

Key Resistance: 24,686, 25,078

Key Support: 24,200, 23,893

Strategy: Buy Nifty August Futures near 24,590, with a stop-loss of 24,450, and a target of 24,850.

Bank Nifty - Outlook and Positioning

Rajesh Palviya, Senior Vice President Research (Head Technical Derivatives) at Axis Securities

Bank Nifty started the week (ended August 16) on a negative note and remained extremely volatile on both sides throughout the week. Bank Nifty closed at 50,517, with a gain of 32 points on a weekly basis. On the weekly chart, the index has formed a "Doji" candlestick pattern, indicating indecisiveness among market participants regarding direction. The chart pattern suggests that if Bank Nifty crosses and sustains above the 50,750 level, it could witness buying, leading the index towards 50,850-51,000 levels. However, if the index breaks below the 50,200 level, it could witness selling, taking the index towards 50,000-49,800 levels.

For the week, we expect Bank Nifty to trade in the range of 51,000-49,800 with a negative bias. The weekly strength indicator RSI is in negative territory and is below its respective reference line, indicating a negative bias.

Key Resistance: 51,000, 51,300

Key Support: 50,000, 49,500

Strategy: Buy Bank Nifty near 50,400 with a stop-loss of 50,250 and a target of 50,750-50,900.

Rajesh Bhosale, Technical Analyst at Angel One

Despite the impressive recovery on Friday, there were no significant changes to the chart structure of Bank Nifty, which remains confined within its recent trading range. Unless the index breaks out of this range, it is unlikely that we will see any uptick in momentum. The 50,700-50,800 zone marks the upper boundary, while the 49,650-49,600 range marks the lower boundary. The presence of the 20-DEMA and 50-DEMA together, in the 50,700-50,800 band makes this zone a very crucial level going forward. A convincing breakout above this level would suggest that buyers have regained control of the index. In terms of support levels, 49,700-49,550 continues to serve as the immediate support zone.

Along with the price movement, there hasn't been any significant change on the options chain. The highest open interest for out-of-the-money Calls is at 51,500, while for out-of-the-money Puts, it is at the psychological level of 50,000. Although positive momentum was visible on Friday, there are no major signs of a reversal indicating strong performance from this heavyweight. Traders should ideally wait until the early part of the week to observe new formations and identify the next phase of the trend in this area.

Key Resistance: 51,000, 51,300, 51,500

Key Support: 50,000, 49,800, 49,500

Strategy: The high-beta index is still trading within a weekly range. It is advisable not to chase the momentum; instead, consider a buy-on-dips strategy, provided the week’s low around 49,700 is maintained.

Vinay Rajani, CMT, Senior Technical/Derivative Analyst at HDFC Securities

Bank Nifty has formed a bullish double-bottom formation near 49,650 and reversed north. Bank Nifty has closed above the resistance derived from the downward-sloping trendline adjoining the daily lows of July 29 and August 12, 2024. The index has closed above its 10-day EMA for the first time since July 18, 2024. Indicators and oscillators like DMI (Directional Movement Index) and RSI (Relative Strength Index) have turned upwards with a positive crossover. For the last two consecutive weeks, Bank Nifty has been forming a long-legged “Doji” candlestick pattern on the weekly chart, and considering the current setup, there are high chances of sharp short-covering in the index going forward.

Key Resistance: 51,087, 51,930

Key Support: 49,800, 49,650

Strategy: Buy Bank Nifty August Futures near 50,630, with a stop-loss of 49,960, and targets of 51,087 and 51,930.

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