Technical View: Nifty 50 needs decisive move above 23,600 for trend reversal; Bank Nifty faces immediate…

Fresh updates from the financial markets indicate that Bulls advanced further resilience, driving the Nifty 50 elevated for the fourth consecutive session on September 21 and giving the market a healthy start to the week. Momentum indicators additionally revealed further weakening of the bearish phase, while the index tested the 10-day EMA intraday, which appears to be flattening out. That stated, the broader structure stays in favour of the bears, as the index continued to trade well below all key moving averages, with the 20-, 50-, 100- and 200-day EMAs still sloping downward.

For a trend reversal, the index needs to attract firm follow-up buying and reclaim and sustain above the 23,600-23,700 zone, which could pave the way for a surge towards 24,000. That stated, after four consecutive sessions of upside, immediate backing has shifted elevated to 23,300, which coincides with Monday's low, while crucial backing is placed in the 23,100-23,000 zone, as per specialists.

After opening flat with a slightly negative bias, the Nifty 50 immediately rebounded and advanced resilience as the session progressed. It touched an intraday high of 23,467 in the latter part of the session before witnessing some earnings booking and closed 68 points, or 0.29 percent, elevated at 23,414.

On the daily charts, the index formed a bullish candle with a minor upper wick and continued its elevated high-elevated low formation for the third consecutive session within last Tuesday's long red candle, indicating a positive bias amid range-bound trading. That stated, the broader softer high-softer low structure stays intact.

The RSI rose to 37.54 and surpassed its signal line but remained below the 50 mark. The MACD additionally moved elevated but remained below the reference line, while the red histogram bar contracted for the fourth consecutive session. These indicators point to a gradual weakening of bearish momentum.

Cooling crude prices from the recent high of $110 a barrel additionally supported the market, although Brent crude futures remained slightly above the $100-a-barrel mark.

"The index has surpassed the immediate hurdle of the mid-point of the long bear candle of September 15 around the 23,300 level. Hence, this is a positive indication for the short term, and the next upside level to watch is around 23,600, which is the upper area of that long bear candle and additionally a hurdle as per change in polarity," Nagaraj Shetti, Senior Technical Research Market observer at HDFC Securities, stated.

Any softness from here could find backing around the 23,200 level the current week, he further noted.

The weekly options data suggested that the 23,400 and 23,300 strikes, where maximum Put open interest is concentrated, are likely to act as immediate backing for the Nifty 50. This is followed by the 23,000 strike, where the next-highest Put open interest is placed, making it a crucial backing level.

On the other side, the 23,500 strike, which holds the maximum Call open interest, could act as immediate resistance for the index. This is followed by the 23,600 and 23,700 strikes, which have the next-highest Call open interest and could pose further hurdles.

In the meantime, the India VIX provided further comfort to bulls, falling 1.43 percent to 11.22 and extending its downtrend for the fourth consecutive session. It remained firmly below all key moving averages, signalling greater stability and a less uncertain environment for the market.

The banking index extended its uptrend for the second consecutive session but continued to face pressure at elevated marks, keeping it below the 10-day EMA on closing basis for the third straight session after testing the same intraday. The index advanced 112 points, or 0.20 percent, to end at 56,471 on Monday.

On the daily timeframe, the Bank Nifty formed a bullish candle with a noticeable upper wick within the long red candle of September 15, indicating a positive bias amid range-bound trading.

The Bank Nifty has been consolidating within a narrow range of nearly 1,300 points over the last eight trading sessions. The index keeps trade below its key short- and medium-term moving averages. That stated, due to the ongoing consolidation, these moving averages have flattened out, indicating a lack of directional momentum.

Momentum indicators additionally revealed a weakening of bearish momentum. The RSI rose to 44.62 and surpassed its signal line. The MACD moved elevated but remained below the signal line, while the softness in the histogram faded for the fourth consecutive session. These indicators suggest that the bearish momentum is gradually losing resilience.

According to Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities, the 56,800-57,000 zone, which coincides with the 20 and 50-day EMAs, is likely to act as a crucial resistance area for the index. A decisive move above 57,000 could trigger a fresh leg of the surge and pave the way for an advance towards 57,500 in the short term.

On the downside, the 56,000-55,900 zone will stay an important backing area. As long as the index holds above this backing band, the ongoing consolidation is likely to continue. That stated, a breach below 55,900 could weaken the near-term structure and result in increased selling pressure, he stated.