Technical View | Uptrend sustains for yet another session, Nifty may hit recent swing high

Market

The Nifty50 extended its upward journey for the third straight session on April 26, ahead of the monthly expiry of futures and options contracts tomorrow. The index has formed a bullish candlestick pattern with a long lower shadow on the daily charts indicating support-based buying at lower levels.

The index after opening flat gained strength in late morning deals and remained higher in the rest of the session to hit an intraday high of 17,828. Finally, it closed above the 17,800 mark, for the first time since April 13, rising 44 points to 17,814.

While consistently taking the support at 17,700, the Nifty has been making higher highs and higher lows for three days in a row, with trading above all key moving averages (21, 50, 100 and 200-day EMA - exponential moving averages). On a weekly basis so far, the index has formed a bullish candle and smartly held the downward-sloping resistance trendline adjoining previous major swing highs.

Hence, the index is likely to hit its previous swing high of 17,860 and if the same price holds on a closing basis, the 17,900-18,000 will be the next major resistance area, with initial support at 17,700, and then 17,600 levels, experts said.

"The Nifty bulls managed to hold the support of 17,700 after the gap-down opening and the index recovered fully at the end of the session. The momentum remains strong and one should keep a buy approach and expect targets of 18,000-18,200 in the near term," Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities said.

The monthly expiry indicates resistance at 18,000 where the highest open interest is built up on the Call side, he added.

On the Option front, we have maximum Call open interest at 18,000 strike, followed by 17,900 and 17,800 strikes, with Call writing at 17,900 strike, then 18,000 strike, whereas the maximum Put open interest was at 17,700 strike, followed by 17,800 and 17,600 strikes, with meaningful Put writing at 17,800 and 17,700 strikes.

Per the above Option data, the expected near-term trading range for the Nifty50 would be 17,500-18,000 levels.

The Bank Nifty also traded in line with broader markets, rising 151 points to 42,830 and forming a Bullish Engulfing kind of pattern on the daily scale, with continuing higher highs-higher lows formation for the third consecutive session.

Hence, experts expect the index to likely break the 43,000 mark soon, with crucial support at the 42,000 mark.

"The Bank Nifty showed a promising upmove from the day's lows, after the lacklustre type movement in the previous session. This is a positive indication," Nagaraj Shetti, Technical Research Analyst at HDFC Securities said.

The volatility remained on the lower side, hovering largely in the range of 11-12 levels, giving stability to the market. India VIX, which measures the expected volatility in the Nifty50 for the next 30 days, rose by 1.15 percent to 11.65 levels from 11.52 levels.