Technical View | Nifty consolidation possible after sharp run-up, but overall trend remains positive

The overall undertone of the index remains bullish, suggesting that the trend is likely to continue.

The Nifty50 continued its northward journey for the fourth consecutive session and surpassed 19,800 for the first time on July 18, backed by technology stocks and index heavyweight Reliance Industries. As a result, the support has been shifting higher and the index gradually seems to be inching towards the 20,000 mark, the psychological milestone.

The index opened higher at 19,788 and hit a new high of 19,819 intraday but lost all its gains in noon and fell below 19,700 levels. However, it immediately recovered those losses in the later part of the session and traded higher amid volatility. Finally, the index settled at a fresh closing high of 19,749, up 38 points.

The Nifty50 has formed a bearish candlestick pattern on the daily charts, but continued making higher highs and higher lows formation for four days in a row. Hence, the momentum may remain strong, though there could be a possibility of some consolidation after the recent run-up, with support at 19,600-19,500 levels, experts said.

"The Nifty50 is rising along the expanding upper Bollinger band indicating that the positive momentum is likely to continue. Considering the sharp runup, there can be consolidation; however, the overall trend is positive, and in case a dip occurs it should be bought into," Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas said.

On the upside, he feels that the short-term target is placed at 19,900. In terms of levels, 19,630–19,580 shall act as a crucial support zone, he said.

Option data said the maximum Call open interest remained at 20,000 strike, followed by 19,800 strike, with meaningful Call writing at 20,300 strike, then 19,800 strike, whereas the maximum Put open interest was at 19,600 strike, followed by 19,500 strike, with Put writing at 19,200 strike, then 19,700 and 19,800 strikes.

In the coming sessions, the above data suggested that 19,700-19,800 is expected to be a crucial area for further upmove towards the 20,000 mark, while the support remains at 19,600-19,500 levels.

Bank Nifty

Bank Nifty has made a nice attempt to break out the upward-sloping resistance trendline and hit a new high of 45,906 but could not sustain gains for long and corrected up to 45,281. The index showed a bit of recovery in late trade and closed with 39 points loss at 45,411; however, it continued with higher highs and higher lows formation for yet another session.

"The overall undertone of the index remains bullish, suggesting that the trend is likely to continue. Traders and investors may consider adopting a buy-on-dip approach, looking for opportunities to enter the market during price pullbacks," Kunal Shah, senior technical & derivative analyst at LKP Securities said.

He believes that a key support level is observed at 45,000, which may act as a significant level of support for the index. Traders may use this level as a reference for setting their stop-loss levels or determining potential buying opportunities, he advised.

The next major hurdle for the index is placed at 46,000, he noted.

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