Technical View: Nifty extends gains but sharp uptrend possible only after decisive close above 21,750

21,725-21,750 is crucial for further uptrend in Nifty 50

The Nifty 50 had yet another volatile session and settled with moderate gains on January 11, continuing uptrend for two days in a row. The index went closer to the downward sloping resistance trendline intraday, which was its day's high, but could not sustain there.

Hence, for further northward journey, the index needs to decisively close above 21,725-21,750 area in coming sessions, which can lift it towards record high (21,834), the immediate hurdle, whereas 21,500 remains to be seen as a crucial support, experts said.

The Nifty 50 opened higher and hit a day's high (21,727) in an initial trade. In the later part of the session, there was a dip which resulted into the index hitting an intraday low of 21,594, but it immediately rebounded and closed with 29 points gains at 21,647.

"Until the range of 21,720 – 21,750 is not breached on the upside we expect the rangebound consolidation to continue," Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas said.

On the downside, 21,550 – 21,520 is the crucial support zone, he feels.

Shrikant Chouhan, head-equity research at Kotak Securities, also said for the bulls now, 21,750 would be the immediate breakout level, post breakout the market could rally till 21,835-21,875.

On the weekly options front, 21,700 strike owned the maximum Call open interest, followed by 22,000 strike and 21,900 strike, with Call writing at 21,700 strike, then 22,100 strike and 21,600 strike, while on the Put front, the maximum open interest was seen at 21,600 strike, followed by 21,500 strike & 21,000 strike, with writing at 21,600 strike, then 21,300 strike.

The above options data clearly indicated that 21,700 is expected to be an immediate hurdle for the Nifty 50, while immediate support may be at 21,600.

Bank Nifty

The Bank Nifty also showed similar kind of trend. The index recovered 200 points from day's low and finally settled with 77 points gains at 47,438, forming bearish candlestick pattern with upper and lower shadows which somewhat resembles High Wave kind of candlestick pattern on the daily charts, indicating indecisiveness among bulls and bears.

"A significant hurdle for the index is identified at 48,000, marked by substantial Call writing. A decisive breakthrough above this level is anticipated to trigger a sharp short-covering rally," Kunal Shah, senior technical & derivative analyst at LKP Securities said.

On the downside, he feels the lower-end support remains intact at 46,900. "A close below this support level may intensify selling pressure in the market."

Further drop in volatility will also turn favourable for bulls. India VIX, which measures volatility for next thirty days in the Nifty 50, fell by 1.07 percent to 12.83 from 12.97 levels. It corrected for three days in a row and hit 200-day EMA (exponential moving average) during the day.