The Nifty50 remained in a strong momentum after bottoming out at 17,550 and continued its upward journey throughout the week ended April 28 to end above a three-month high. In fact, it was a great beginning for the May series, thanks to positive global cues and a fall in oil prices.
The index gained strength after an initial couple of hours of volatility and maintained a northward move for the rest of the session. The index hit an intraday high of 18,089 in late trade and finally settled with 150 points gains at 18,065, the highest closing level since January 24 this year.
The Nifty50 has formed a bullish candlestick pattern on the daily charts with higher volumes and making higher highs and higher lows for the fifth straight session. Also, there was a healthy breakout of a long downward-sloping resistance trendline adjoining highs of December 1 (record high) last year and April 17 this year.
There was a big bullish candle formation on the weekly scale with above-average volumes, as the index rallied 2.5 percent for the week, the highest weekly gains since July 2022.
Hence, if the momentum continues and the index holds the psychological 18,000 mark, then 18,200-18,300 are expected to be the next resistance levels to watch, with supports which shifted higher to 17,900 followed by 17,800 levels, experts said.
The momentum indicators RSI (relative strength index 14) on the daily charts at 71 levels with positive crossover and MACD (moving average convergence divergence) moving just above zero line with giving positive crossover on the weekly scale looked bullish, which is a positive sign.
“The Nifty took support near the 200-day SMA or 17,650 (simple moving average) and bounced back sharply. It has also formed a long bullish candle on weekly charts which is largely positive,” Amol Athawale, Technical Analyst (DVP) at Kotak Securities said.
He feels as long as the index is trading above 17,900, the uptrend formation is likely to continue and could move up to 18,150-18,250.
On the flip side, below 17,900, traders may prefer to exit from the long positions, he advised.
Per the weekly Option data, the maximum Call open interest was at 18,000 strike, followed by 18,200 & 18,300 strikes, with meaningful Call writing at 18,200 strike, then 18,100 & 18,300 strikes, whereas the maximum Put open interest was at 18,000 strike, followed by 17,800 strike, with Put writing at 18,000 strike, then 17,900 strike.
The above Option data indicated that 18,000 is expected to be a crucial level for further market direction as on the upside it has room for up to 18,300 levels, with 17,800-17,900 as a support area.
“The Open Interest data of Nifty suggests that a runaway rally might not take place from here. The Nifty index still has a lot of open interest contracts at the 18,000 straddle level. This is on the short side, the credit for this is less than 400 points which is what traders are expecting Nifty to trade in for the next one or two weeks,” Rahul Ghose, Founder & CEO at Hedged said.
He further said Bank Nifty has the highest Put writers at the 43000 level for this week's expiry but has the highest Call writers for the monthly expiry at the same 43,000 level itself. This also signifies that there might not be a runaway rally post 43,500 on the Bank Nifty index.
Technically, the Bank Nifty maintained higher highs and higher lows formation and formed a bullish candle on the daily charts, while on the weekly scale too, there was a continuation of higher tops and higher bottoms for the fifth consecutive week and it formed a bullish candlestick pattern.
The index sustained above the 43,000 mark, which experts feel is crucial for further upside. It closed with 233 points gains at 43,234, while the weekly gains were 2.65 percent.
“We may see some profit booking at higher levels. In the near future, 42,800-42,500 would be the strong support zone, while 43,700-44,000 could act as an important resistance zone for the traders,” Amol Athawale said.
The volatility dropped significantly, which also gave more comfort to bulls. India VIX, the fear index fell 4.17 percent from 11.43 levels to 10.95, the lowest closing level since December 27, 2019.
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