After moving closer to the upper end of the Rising Channel on an intraday basis in the previous session, the Nifty 50 extended its southward journey further amid consolidation and rising volatility on May 28. The index closed just below 22,900 but traded well above all key moving averages. The charts suggested that bulls’ strength seems to be looking exhausted at higher levels, given the volatility hitting a fresh two-year high ahead of exit polls. Hence, the consolidation is expected to continue in the coming days, with resistance on the higher side at 23,000, followed by 23,100, and support at 22,800 and then 22,600 levels, experts said.
The Nifty 50 closed at 22,888, down 44 points or 0.19 percent, extending its downtrend for the third straight session. The index has formed a bearish candlestick pattern on the daily charts and negated the higher highs formation of the previous 11 consecutive days.
Meanwhile, the Bank Nifty was also under pressure, snapping a three-day winning streak due to profit-taking. However, overall, the trend remains positive. Experts expect the index to gradually move towards the 50,000 mark in the June series, with support at 48,500. The index fell 140 points or 0.28 percent to 49,142.
Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities
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Nifty 50 broke out of the trading range of 21,750 to 22,750 last week. The index crossed the psychological mark of 23,000 but failed to sustain above it. With the election results around the corner, volatility is likely to increase throughout this week and peak next Tuesday as the results will be declared. The index is forming a Bearish Head and Shoulder pattern on the intraday charts. Thus, if it fails to cross the 22,900 levels, then we could see it dip to the 22,700 mark this week.
Key Resistance: 23000, 23,100, 23,500
Key Support: 22,700, 22,500, 22,000
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Strategy: Traders can sell a Call and Put in the June 6 weekly expiry with a strike price of 24,000 and 22,000 respectively. This will ensure you collect premiums leading up to the event. To hedge these options sold, one can go long in the same strikes but in the June 13 expiry. The estimated margin required to execute this strategy is around Rs 31,500. The position will generate maximum profits of around Rs 6,450 if the index swings up or down by about 1,000 points on Monday or Tuesday. Traders can square off their positions when they see a big move in the index.
Stop Loss: If the loss on the total position exceeds 10 percent of the margin you paid, which is Rs 3,150, then you can exit from this trade.
Ashish Kyal, CMT, Founder / CEO at Waves Strategy Advisors
The Nifty touched lifetime high levels of 23,110 on May 27, 2024. There have been multiple attempts above the 23,000 psychological level, but prices have still not managed to close above the same. Overall, the trend is to buy on dips as long as the support near 22,700 remains protected, with 23,110 as an important hurdle.
Prices are moving within the Bollinger Bands, and a breakout above 23,110 will extend this rally further towards 23,290 or higher levels. With the election event approaching, the VIX index is already above 24 levels.
Key Resistance: 22,950, 23,110
Key Support: 22,700
Strategy: From a trading perspective, any dips to 22,810-22,780 can be used as a buying opportunity for a move towards 22,950, with 22,700 as an immediate support.
Stop-Loss: 22,700
Riyank Arora Technical Analyst at Mehta Equities
With the benchmark index almost revisiting its breakout zone of 22,750-22,800, a small decline from the current level of 22,888 would offer a good buying opportunity. A strict stop-loss should be set at the 22,700 mark, and we can anticipate potential targets of 23,000 and 23,100 over time.
For the upcoming monthly expiry on May 30, 2024, the highest open interest is currently outstanding at 24,000 for Calls and 22,500 for Puts. These levels should, therefore, serve as the most important resistance and support for the expiry.
Key Resistance: 23,000, 23,100
Key Support: 22,750, 22,700
Strategy: Buy Nifty near 22,800, 22,850 zone. Target 23,000 and 23,100
Stop-Loss: 22,700
Bank Nifty Outlook and Positioning
Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities
Bank Nifty was a laggard for the month of May but has managed to recover and is outperforming Nifty this week. The index is now placed below the important resistance mark of 49,500. We believe that one can follow a wait-and-watch approach and allow the index to break out of the 50,000 mark decisively or dip closer to the 48,000 mark for traders to get a meaningful opportunity. If the index doesn’t touch either of the two levels during this week, then one can take a fresh view after the election results are announced next week.
Key Resistance: 49,500, 50,000
Key Support: 48,500, 48,000
Strategy: Traders can wait for pullbacks to the psychological support of 48,000 or a break above 50,000 before taking long positions in the index.
Stop-Loss: 48,000
Ashish Kyal, CMT, Founder / CEO at Waves Strategy Advisors
Bank Nifty closed at an important juncture in the previous trading session. We can see that prices have again touched the upper Bollinger Bands area. A breakout above 49,680 can result in the positive trend resuming in this index for a move to 50,000 and higher levels.
On the downside, the support for the index is near 48,620 levels. As long as this level remains intact, one can use dips to buy to play for a range between 49,680 and 48,620 levels over a day or two.
Key Resistance: 49,200, 50,000
Key Support: 48,620
Strategy: Long positions on Bank Nifty can be created if the index moves to 48,840, with 48,620 as the stop-loss and a target of 49,200 or higher levels.
Stop-Loss: 48,620
Riyank Arora Technical Analyst at Mehta Equities
Bank Nifty is trading with a positive structure on its 15-minute timeframe charts, indicating strong bullishness in the benchmark index. Any pullback towards the 48,800 – 48,900 zone should be a good buying opportunity, with a strict stop-loss set at the 48,500 mark.
For the monthly expiry on May 29, 2024, the Options Chain indicates the highest Call open interest at 50,000 and the highest Put open interest at 48,000. It is expected that the market will maintain a strong hold above the 48,000 mark and eventually move higher.
Key Resistance: 49,300, 49,500
Key Support: 48,900, 48,500
Strategy: Buy Bank Nifty near 48,850 – 48,900 zone. Target 49,300 and 49,500
Stop-Loss: 48,500
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