Bulls retained their power over Dalal Street, with benchmark indices ending the special trading session higher on May 18 despite rising volatility, and continuing their upward journey for three days in a row. According to analysts, the Nifty may gradually be moving towards 22,600-22,800 levels, with support at 22,400-22,300 levels. 22,500 is expected to play a crucial role in determining the direction going ahead. Meanwhile, the trend for Bank Nifty is likely to remain bullish, with the next resistance expected at 48,500-49,000 levels.
The Nifty 50 closed at 22,502, higher by 36 points or 0.16 percent, and the Nifty Bank climbed 84 points or 0.17 percent to 48,199.50 on Saturday. About 1,582 shares advanced against declining 638 shares on the NSE.”
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From the recent swing low of 21,821, Nifty has recovered almost 700 points. For the last 10 consecutive weeks, Nifty has been consolidating in the 1,000 points range of 21,800-22,800. However, broader market indices like NSE MicroCap and Smallcap have already registered fresh all-time highs, which is encouraging signs for bulls. The expected trend for the index is likely to be bullish, though we are likely to face some liquidation by bulls around 22,800 levels as the date of election results nears.
Key Resistance: 22800, 23,400
Key Support: 22,300, 22,050
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Strategy: Buy Nifty Near 22500, Stop-Loss at 22,300, Target 22,800
Rajesh Palviya, senior vice president research (head technical derivatives) at Axis Securities
The chart pattern suggests that if Nifty crosses and sustains above the 22,600 levels, it would witness buying, leading the index towards 22,800-23,000 levels. However, if the index breaks below the 22,350 level, it would witness selling, taking the index towards 22,200-22,000. For the week starting from May 21, we expect Nifty to trade in the range of 23,000-22,000 with a mixed bias.
As per weekly options data, 22,800 and 23,000 Call strikes are having high open interest concentration, indicating strong resistance; and on the Put side, high open interest concentration was at 22,400, 22,300, and 22,000, acting as support. The significant Put writing at 22,450 & 22,350 strikes further hints towards a possible up move in the week starting from May 21.
Hence, traders can initiate a moderately bullish strategy with reduced premium outflow & lower breakeven point called a Bull Call Spread of May 23 weekly expiry. In this strategy, the trader will buy one lot of the 22,500 Call strike at Rs 128 and simultaneously sell one lot of the 22,750 Call strike at Rs 33, so that the net outflow or maximum loss will be restricted to up to Rs 2,375.
If Nifty on expiry closes above 22,595, the strategy will start making a profit. However, as the risk is limited, so is the profit, which will be restricted to up to Rs 3,875 only. This is because the gains of the long 22,500 strike Call will be offset by the sold 22,750 strike Call if Nifty closes above 22,750 on expiry.
Note: The Bull Call Spread strategy involves buying an in-the-money (ITM) Call and selling an out-of-the-money (OTM) Call option with the same expiry date, when one has a moderately bullish view.
Key Resistance: 22,800, 23,000
Key Support: 22,400, 22,300, 22,000
Strategy: Trade with moderately bullish strategy – Bull Call Spread
Osho Krishan, senior analyst – technical & derivative research at Angel One
On the level-specific front, 22,350-22,300 is likely to cushion any upcoming intra-week blips, followed by the sacrosanct support of 22,200 in the short term. On the higher end, 22,600-22,650 remains a sturdy resistance before Nifty could claim its lifetime high of 22,800.
On the options front: The highest open interest concentration is at 22,400 PE; while scattered piling among Call writers has been seen from 22,500 to 22,800 strikes on an immediate basis.
Key Resistance: 22,600, 22,650, 22,800
Key Support: 22,350, 22,300, 22,200
Strategy: Utilize dips to add longs and book profits near the resistance zone of 22,650
Bank Nifty – Outlook and Positioning
Rajesh Palviya, senior vice president research (head technical derivatives) at Axis Securities
The chart pattern suggests that if Bank Nifty crosses and sustains above the 48,300 levels, it would witness buying, leading the index towards 48,500-48,800 levels. However, if the index breaks below 48,000 levels, it would witness selling, taking the index towards 47,750-47,500. For the week starting from May 21, we expect Bank Nifty to trade in the range of 48,800-47,500 with a mixed bias.
As per the weekly options data, 48,500, 49,000, and 49,500 Call strikes are having high open interest concentration, indicating strong resistance; and on the Put side, high open interest concentration is at 47,500, 47,000, and 46,500 strikes acting as support, while the pivotal level will be 48,000.
Traders can initiate a moderately bullish strategy with reduced premium outflow & lower breakeven point called a Bull Call Spread of May 22 weekly expiry. In this strategy, the trader will buy one lot of the 48,500 Call strike at Rs 117 and simultaneously sell one lot of the 49,000 Call strike at Rs 26, so that the net outflow or maximum loss will be restricted to up to Rs 1,365. If Bank Nifty on expiry closes above 48,591, the strategy will start making a profit with maximum gains restricted up to Rs 6,135. This is because the gains of the long 48,500 strike Call will be offset by the sold 49,000 strike Call if Bank Nifty closes above 49,000 on expiry.
Key Resistance: 48,500, 49,000, 49,500
Key Support: 47,500, 47,000, 46,500
Strategy: Trade with moderately bullish strategy – Bull Call Spread
Osho Krishan, senior analyst – technical & derivative research at Angel One
The strong overhead supply around 48,000-48,500 is likely to restrict advances. The next couple of trading sessions will be quite crucial, and it will be important to see whether the follow-up move comes in the banking space or not. In terms of levels, support for Bank Nifty is currently positioned around the 47,500-47,200 zone in the immediate term.
On the options front: The highest open interest concentration is at 48,000 PE and 48,500 CE, suggesting the intermediate trading range.
Key Resistance: 48,500
Key Support: 47,500, 47,200
Strategy: Dips are likely to augur well for buyers; use bounce to exit longs around 48,500
Devarsh Vakil, Deputy Head – Retail Research at HDFC Securities
From the recent bottom of 46,983, Bank Nifty has recovered more than 1,200 points. Momentum has been lacking, and the recent recovery has been shallow in the index. Despite the recent underperformance, sectoral rotation could push the Bank Nifty index towards higher levels. The expected trend for the index is likely to be bullish.
Key Resistance: 49,000, 49,600
Key Support: 47,700, 47,300
Strategy: Buy Bank Nifty near 48,200, stop-loss 47,700, target 49,000
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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