It was yet another rangebound session for the Nifty50 on May 24, ahead of the monthly F&O contracts expiry tomorrow, as traders may be digesting the ongoing corporate earnings. The index continued to face strong resistance at the 18,400 mark for the second straight day and there has also been a battle between bulls and bears to get the charge over Dalal Street.
The index opened lower at 18,295, but recovered immediately to hit an intraday high of 18,393. However, the index lost those gains in the afternoon and finally settled below 18,300 at 18,285, down 63 points and forming a Doji sort of candlestick pattern on the daily charts, indicating tug of war between bulls and bears.
Hence, if the index manages to give a decisive close above 18,400 then further rally can't be ruled out. But dropping below 18,200, which is the near-term support, can induce selling pressure as well as consolidation, experts said.
Overall, the trend seems to be positive though we are seeing ongoing consolidation for the last several sessions, as the Nifty50 continued to trade above all key moving averages (21, 50, 100 and 200-day EMA - exponential moving average).
"The Nifty index has been firmly held by bears, indicating their strong control over the market. The index is currently facing significant resistance at the level of 18,400, which has proven to be a challenging barrier to overcome," Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities said.
The ongoing battle between bulls and bears has resulted in the index trading within a consolidated range between 18,200 and 18,400 levels. However, a break above or below this range has the potential to trigger trending directional moves in the market, he says.
Traders and investors should closely monitor the index for a potential breakout or breakdown, as it may indicate a shift in market sentiment and the beginning of a new trend, Shah advised.
Per monthly Option data, 18,400 also enjoyed maximum Call open interest, indicating the strong resistance for the Nifty, followed by 18,500 strike and 18,300 strike, with Call writing at 18,300, 18,400 and 18,500 strikes.
On the Put side too, 18,200 strike has maximum open interest, which can be critical support for the index, followed by 18,300 strike, followed by 18,000 strike, with meaningful writing at 18,200 strike, and then 18,100 strike.
The Bank Nifty was also under pressure and was one of the sectors dragging the Nifty50 below the 18,300 mark. The index fell 277 points to 43,678 and formed a small-bodied bearish candle with a long upper shadow on the daily scale, indicating selling pressure at higher levels. But overall, the index has been in a particular range and today also failed to hold on to the 44,000 mark.
"The index has to hold above 43,750 levels to make a bounce towards 44,144 and then 44,250 levels, while a hold below the same could see some weakness towards 43,500, and then 43,333 levels," Chandan Taparia, Senior Vice President, Analyst-Derivatives at Motilal Oswal Financial Services said.
We have seen an increase in volatility and the index moved above the 13 mark, giving discomfort for bulls. The India VIX, which measures the expected volatility for the next 30 days in the Nifty50, rose by 4.02 percent to 13.11 levels, from 12.61 levels.
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