Bulls came back with a vengeance on May 4 as the Nifty50 clocked nearly a one-percent gain after a day small correction and the FOMC delivered 25 bps hike in fed funds rate with giving signals about potential pause in rate hike cycle.
The index gained strength after initial volatility and extended northward journey as the day progressed to hit a day's high of 18,267.45 in late trade. Finally, it settled with 166 points gains at 18,256, the highest closing level since December 20 last year, forming long bullish candlestick pattern on the daily charts with a higher high, higher low formation.
Momentum indicators RSI (relative strength index) and MACD (moving average convergence divergence) also showed positive trend, while on the weekly basis, the Nifty maintained higher tops formation for sixth consecutive week.
Hence, if the index decisively surpassed 17,300 and holds the same, then 17,500-17,600 looks like a possibility in coming sessions, with support at 18,000-18,100 levels, experts said.
The rally was supported by banking & financial services, metal, technology, and pharma stocks.
"A long bull candle pattern indicates a strong upside momentum in the market without any reasonable downside correction. The market is in a sharp up trended movement and resistances are being taken out on the upside one after another," Nagaraj Shetti, Technical Research Analyst at HDFC Securities, said.
He feels the Nifty is now placed to witness sharp upside breakout of the crucial resistance zone of around 18,200-18,300 levels. Hence, a decisive move above this area could open the next upside targets of around 18,600-18,700 levels in the near term, while immediate support is placed at 18,150-18,100 levels, he said.
The weekly Option data also indicated that 18,300 strike - 18,200 strike, which has the maximum Call open interest, is expected to be key area for the Nifty50 to decide further upward journey, with meaningful Call writing at 18,300 strike.
On the Put side, we have maximum open interest at 18,200 strike and 18,100 strike, which can provide immediate support to the index, with writing at similar strikes.
Bank Nifty has also taken out the key resistance level of the 43,500 mark. After an initial hour of volatility, the banking index also got into the momentum and hit a day's high of 43,740 in late trade. It settled at 43,685, the highest closing level since December 14 last year, up 373 points and formed bullish candlestick pattern on the daily scale.
"It is likely to head toward its all-time high of 44,151. On the downside, the 43,200–43,000 area will act as a demand zone," Santosh Meena, Head of Research at Swastika Investmart, said.
Now, Bank Nifty is 466 points away from its record high of December last year.
With fall in oil prices, and continuous buying by FIIs for the last few days also fueled the strength in the headline indices, while the broader market is showing great strength. The Nifty Midcap 100 and Smallcap 100 indices rose 0.6 percent and 0.8 percent respectively.
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