Trading Plan: Will Nifty defend 23,600, Bank Nifty hold 50,600 on closing basis?

Nifty Trading Plan

The Nifty 50 recouped significant losses intraday by taking support at 23,450 and closed flat with a positive bias above the upward sloping support trendline on December 31. However, it remained below all key moving averages and continued to trade in a range-bound fashion. Hence, as long as the index holds 23,600–23,500 on a closing basis, resistance is seen at 23,700, followed by the 23,900–24,000 zone. However, if it breaches 23,500, the first target is 23,400 (50-week EMA), followed by 23,263 (November low), experts said.

On Tuesday, December 31, the Nifty 50 recovered 185 points from its day's low to end at 23,658, up 13 points. The Bank Nifty declined by 66 points to 50,887. The market breadth was positive, with 1,572 advancing shares compared to 931 declining shares on the NSE.

Nifty Outlook and Strategy

Dhupesh Dhameja, Derivative Research Analyst at Samco Securities

Currently, the Nifty 50 is stuck within the defined range of 23,500 to 24,000, with significant open interest buildup on both Calls and Puts, reinforcing the ongoing standoff between buyers and sellers. At present, the index is holding firm above its crucial support zone of 23,500–23,450, a level bolstered by Put writers and a solid base formation, which is offering buying interest from lower levels.

On the upside, the 23,800–24,000 resistance zone remains formidable, driven by heavy Call writing and swing highs, posing a significant challenge for further upside. For any meaningful uptrend to unfold, the index must decisively clear the psychological 24,000 mark, which serves as a critical turning point. Conversely, weakness would emerge if the index decisively breaches its support zone (23,500–23,550), potentially triggering a sharp downside move, fueled by unwinding of buying positions. Until a breakout materializes on either side, a cautious range-trading approach, buying at support and selling at resistance, seems prudent.

Key Resistance: 23,800, 24,000, 24,200

Key Support: 23,500, 23,300, 23,000

Strategy: Traders can implement a Bull Put Spread by buying the 23,800 Put strike at Rs 180 and selling the 24,000 Put strike at Rs 319, both for the January 2 weekly expiry. In case of stop-loss, the strategy can be held until expiry, with the maximum loss capped at Rs 4,556. In case of target, hold the strategy till expiry for a maximum profit of Rs 10,444, or consider booking profits once the mark-to-market (MTM) profit crosses Rs 5,000.

Ashish Kyal, CMT, Founder / CEO of Waves Strategy Advisors

For the past 11 trading sessions, the Nifty has not given a close above the prior candle's high, which is a negative sign. The overall trend continues to be "sell on rise" unless we see a close above the prior day's high. From a short-term perspective, volatility will be very high, given the thin volumes and the extreme loss margin being implied, with FIIs on holiday mode. We can expect wild swings within a broader range. In summary, the overall trend for the Nifty continues to remain on the downside. A breach below 23,530 will resume the downtrend, while on the upside, 23,950 is the crucial resistance to watch out for.

Key Resistance: 23,950

Key Support: 23,270

Strategy: Short positions can be created below 23,530, with a stop-loss at 23,600, targeting 23,460, followed by 23,400.

Preeti K Chabra, Founder of Trader Delta

The Nifty index at 23,644 faced resistance at the crucial 200 DEMA of 23,693 on the last day of 2024. For the past 3 trading sessions, Nifty has been forming a lower high and lower low sequence, trading in a downward channel on the daily chart. Also, looking at the daily sequence of Nifty in the week of December 23, all minor gains were sold in the big bearish candle of December 30. We advise traders to adopt a sell-on-rise stance in Nifty until we see a breakout from the channel. We find support on the weekly chart at the 50 EMA of 23,428, followed by 23,263.

Key Resistance: 23,693, 23,872

Key Support: 23,428, 23,263

Strategy: Sell Nifty Futures if the price faces resistance near the 23,693 level. Set a target of 23,428 with a stop-loss at 23,693.

Bank Nifty - Outlook and Positioning

Dhupesh Dhameja, Derivative Research Analyst at Samco Securities

The Nifty Bank index continued to hover within a narrow trading range, displaying minimal price movement and recurring indecisive candlestick patterns, reflecting a lack of clear direction. Currently, the index is trading near a key support zone between 50,500 and 50,450, coinciding with the 200-day exponential moving average (200-DEMA), which has historically served as a solid support level. As long as the index holds above this support, buying interest continues to emerge from lower levels. The index is trading below the critical psychological level of 51,000, which is acting as immediate resistance. A breakout above this level could spark a resurgence in buying momentum, propelling the index higher.

Options data further supports this view, with substantial Put writing observed at lower strikes (50,500–50,400) and significant Call writing at higher strikes (51,200–51,500), thereby establishing a defined trading range for the index. For any sustained uptrend to materialize, the index must secure a decisive move above the 51,000-resistance level, marking a crucial turning point. Conversely, a breach below the 50,500–50,450 support zone could accelerate the bearish trend, exacerbated by potential unwinding of buying positions. Until a breakout occurs in either direction, a cautious range-trading strategy is advised, buying at support and selling at resistance.

Key Resistance: 51,000, 51,500, 52,000

Key Support: 50,500, 50,000, 49,700

Strategy: Traders may consider a conditional buy on January futures if the index breaks above the 51,450–51,500 range. Set a stop-loss below 51,000 to manage risk, with a target range of 52,100–52,200 for potential upside.

Preeti K Chabra, Founder of Trader Delta

Bank Nifty had a disappointing start this week, with a false breakout on December 30, which took many traders by surprise. It is currently trading below the crucial resistance of the 150 DEMA of 51,073 and is forming a lower high and lower low sequence on the daily chart. Bank Nifty is trading at a Relative Strength Index (RSI) of 38.07 and is trending downward, suggesting bearishness. We advise traders to adopt a sell-on-rise view in Bank Nifty. We see support for Bank Nifty at the 200 DEMA of 50,475.

Key Resistance: 51,073

Key Support: 50,475

Strategy: Sell Bank Nifty Futures if we see rejection in the area of 51,073, targeting 50,475, with a stop-loss of 51,073.

Ashish Kyal, CMT, Founder / CEO of Waves Strategy Advisors

Bank Nifty is currently approaching channel support near the 50,590 level. A breakdown below this could accelerate further selling pressure. Since December 20, prices have protected the previous day's high, which is a negative sign. In the previous session, prices witnessed a minor pullback from the support level of 50,590 and closed Tuesday's session on a positive note. However, prices still managed to protect the previous day's high, which keeps the overall undertone on the negative side. In summary, the trend for Bank Nifty is negative. For now, a break below 50,590 is needed for the further correction to continue. On the upside, the nearest resistance is at 51,100. A break above it could result in deeper pullbacks.

Key Resistance: 51,100

Key Support: 50,000

Strategy: Short positions can be created below 50,590, with targets of 50,230, followed by 50,000, and a stop-loss at 50,950.