The Option data suggests that the Nifty is likely to encounter a significant obstacle in the 19,400-19,500 range on the upside, while finding support in the 19,200-19,000 range.
On August 28, the Nifty50 staged a rebound as anticipated, following the formation of an Inverted Hammer Candlestick pattern the previous week. The index showed respect for the 19,200-19,250 levels, which are expected to serve as crucial support in the near future. However, experts suggest that unless the index manages a strong closing above 19,400, any upward momentum is unlikely, and consolidation may persist in upcoming sessions.
The Nifty50 commenced the day at 19,298, reaching a low of 19,250. After initial volatility, it gained momentum and remained in positive territory, reaching an intraday peak of 19,367. Towards the end of the trading day, there was some profit-taking, but the index settled at 19,306, recording a 40-point gain. Notably, it formed a Doji candlestick pattern on the daily charts, indicating uncertainty among market participants regarding the future direction.
Typically, the formation of such Doji patterns following a significant upward or downward movement signals a potential trend reversal. However, given that this pattern emerged alongside the negative candle from the previous Friday, it suggests that the market may be range-bound for now, according to Nagaraj Shetti, a technical research analyst at HDFC Securities. He maintains that the short-term outlook for the Nifty remains bearish.
As long as the index remains below the 19,400 level, there’s a possibility of further downside, potentially reaching support levels at 19,100-19,000. On the flip side, a convincing breakthrough above the immediate resistance at 19,370-19,400 could pave the way for an upward move towards the 19,600 level in the short term, Nagaraj added.
Turning to the Options market, the maximum Call open interest is seen at the 19,500 strike, followed by the 19,400 and 19,300 strikes, with Call writing noted at the 19,500 and 19,600 strikes. On the Put side, the highest open interest is observed at the 19,300 strike, followed by the 19,000 and 19,200 strikes, with Put writing identified at the 19,300 and 19,200 strikes.
In summary, the data suggests that the Nifty could face a substantial hurdle in the 19,400-19,500 range on the upside, while finding support at levels between 19,200 and 19,000.
Bank Nifty:
Moving on to the Bank Nifty, it also experienced a rebound and closed precisely at the 50-day Exponential Moving Average (EMA). The index displayed a higher high and higher low pattern, surging 263 points to 44,494.7. It formed a bullish candlestick pattern on the daily charts. Experts suggest that a firm close above 44,500 levels could propel the index towards the 45,000 mark.
The Bank Nifty index demonstrates strong bullish sentiment at the lower end of its range, with sustained buying interest. As long as the index holds above the critical level of 44,000, which aligns with significant Put open interest, the prevailing outlook remains on the buy side, according to Kunal Shah, a senior technical & derivative analyst at LKP Securities. The immediate challenge for further upside movement is at 44,500, and breaching this level could trigger short covering and drive the index towards 45,000, which is significant due to the highest open interest on the Call side.
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