Trading Plan: Will Nifty consolidates around 25,400, Bank Nifty climb above 52,000?

Nifty Trading Strategy

The Nifty 50 saw consolidation after a day of significant gains and recorded moderate losses due to profit booking on September 13, forming a bearish candlestick pattern on the daily charts. However, it gained 2 percent during the week, forming a Bullish Engulfing candlestick pattern on the weekly timeframe, which is a bullish indicator. If the index sustains above 25,100 amid likely consolidation, 25,500 is a possible target, followed by 25,800. The Bank Nifty is expected to march towards 52,800 if it closes and sustains above 52,000, according to experts.

On Friday, the Nifty 50 declined by 32 points to 25,357, while the Bank Nifty increased by 166 points to 51,938. On the NSE, 1,551 shares advanced, while 904 shares declined.

Nifty Outlook and Strategy

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

For confirmation of the Bullish Engulfing formation, a break above the previous week’s high would indicate a potential shift in trend to the upside. The chart pattern suggests that if Nifty crosses and sustains above the 25,500 level, it may see buying interest, potentially leading the index towards 25,700–25,900. However, if the index breaks below the 25,200 level, selling pressure could push the index towards 25,000–24,800. For the week, Nifty is expected to trade within the range of 25,800–24,800 with a positive bias. The weekly strength indicator RSI (Relative Strength Index) is on the verge of crossing above its reference line, signaling a possible trend shift to the positive side.

Key Resistance: 25,500, 25,650

Key Support: 25,250, 25,100

Strategy: Buy Nifty around 25,300, with a stop-loss at 25,200 and a target of 25,550–25,600.

Rajesh Bhosale, Technical Analyst at Angel One

Going forward, dips towards key support levels should be viewed as buying opportunities. While there are no immediate signs of weakness, the momentum oscillator RSI Smoothened has failed to surpass its previous high, signaling a "2-Point Negative Divergence" on the daily chart. With the upcoming Fed policy decision, it may be prudent to book profits at higher levels to account for potential volatility. For support levels, 25,200 serves as immediate support for Nifty 50, while the Thursday rally point of 25,000–24,970 is seen as strong support. On the upside, the 25,500–25,600 zone could act as resistance, aligning with the "Bearish Wolfe Wave" reversal zone, followed by 25,800 as the next retracement resistance.

On Thursday, we observed strong short covering as Call writers exited their positions. However, on Friday, price traction was limited, with notable option writing seen in slightly out-of-the-money Calls and Puts. In the coming week, ahead of the key Fed policy announcement, the markets are likely to trade within a range of 25,500 and 25,200. The highest open interest for the upcoming week is at 26,000 for out-of-the-money Calls and 25,000 for Puts, suggesting potential for increased volatility as the event approaches.

Key Resistance: 25,500, 25,600, 25,800

Key Support: 25,200, 25,000, 24,970

Strategy: Considering the upcoming event, traders should avoid complacent positions. It's advisable to buy on dips and book profits at higher levels to manage risk effectively.

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

The overall trend of Nifty remains bullish. Resistance levels for Nifty are now seen at 25,527 and 26,033, which correspond to the 38.2 percent and 50 percent Fibonacci extension levels, based on major swings observed over the last four months. On the downside, the 25,100–25,150 zone is expected to offer support.

Key Resistance: 25,527, 26,033

Key Support: 25,100, 25,150

Strategy: Buy Nifty September Futures near 25,356, with a stop-loss at 25,130, and a target of 25,650.

Bank Nifty - Outlook and Positioning

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

The Bank Nifty gained 1,361 points over the week. On the weekly chart, the index has formed a bullish candle, completely engulfing the previous week's move, creating a "Bullish Engulfing" candlestick formation, which is a bullish pattern. Confirmation of this formation would require a break above the previous week's high, indicating a potential trend reversal to the upside.

The chart pattern suggests that if Bank Nifty crosses and sustains above the 52,000 level, it may see buying interest, potentially driving the index towards 52,500–52,700. However, if the index breaks below the 51,650 level, selling pressure could take it towards 51,500–51,200. For the week, Bank Nifty is expected to trade within a range of 52,700–51,200 with a positive bias. The weekly strength indicator RSI is on the verge of crossing its reference line, suggesting that the trend may turn positive.

Key Resistance: 52,200, 52,500

Key Support: 51,750, 51,500

Strategy: Buy Bank Nifty near 51,750, with a stop-loss at 51,500 and a target of 52,200–52,350.

Rajesh Bhosale, Technical Analyst at Angel One

During the week, Bank Nifty found support at the 89 EMA and triggered a significant bounce, breaking through the recent congestion zone on the upside. The formation of an "Inverse Head and Shoulders" pattern suggests strong performance in the near term. For the upcoming week, strong support is seen at 51,200–51,000, which aligns with the 50-day EMA (Exponential Moving Average). If the positive momentum continues, prices may test the previous swing high of 53,000.

On the options front, there is light open interest formation for slightly out-of-the-money Calls and Puts, with significant open interest at the 54,000 and 53,000 Call strikes. Conversely, notable open interest has built up at the 51,000 Put strike, indicating a preference for a wide range in this high-beta index during the eventful week, with a positive bias.

Key Resistance: 52,500, 52,800, 53,000

Key Support: 51,500, 51,200, 51,000

Strategy: The Bank Nifty is likely to outperform in the coming week, following its breakout from the congestion zone. Traders should maintain a positive bias, use dips as buying opportunities, and focus on Bank Nifty constituents.

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

Last week, Bank Nifty surged by 2.7 percent. It is one of the few sectoral indices that has not reached a new all-time high in the past three months. Currently, it is more than 2.5 percent away from its all-time high of 53,357, recorded on July 4, 2024. Last week, Bank Nifty outperformed Nifty 50 for the first time in a while and closed on a strong note. The index also surpassed the crucial resistance level of 51,750. The Nifty Private Bank Index registered a bullish breakout on the daily charts, while PSU banks rebounded after turning oversold. Considering these factors, the Bank Nifty index is expected to perform well in the coming days.

Key Resistance: 52,340, 52,782

Key Support: 51,000, 50,370

Strategy: Buy Bank Nifty September Futures near 51,938, with a stop-loss at 51,370, and targets of 52,340 and 52,782.

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