Nifty Outlook: Decisive Close Above 200-Day SMA (23,850) Critical for Upside Potential

Nifty Outlook: Decisive Close Above 200-Day SMA (23,850) Critical for Upside Potential

The Nifty 50 stayed within a narrow trading range of 23,650-23,850, with the upper boundary coinciding with the critical 200-day SMA (Simple Moving Average). Analysts believe that unless the index decisively closes above this level, the possibility of a rally towards 24,000-24,300 remains limited. On the downside, support levels are identified at 23,650-23,700.

On the monthly F&O expiry session (December 26), the Nifty ended flat with a slight positive bias, reflecting subdued sentiment on both domestic and global fronts. The index opened higher at 23,778, fluctuated within its established range, and eventually closed at 23,750, gaining 23 points. A small bearish candlestick pattern with prominent upper and lower shadows was formed, highlighting the market’s volatility.

Key Technical Levels to Watch

According to Shrikant Chouhan, Head of Equity Research at Kotak Securities:

Breakout Level: A decisive move above 23,850 (200-day SMA) could push the market toward 23,950-24,000.

Support Zone: If the index breaks below 23,650, it may slide further to test 23,550-23,500.

The options data adds another layer of insight:

Resistance Zone: Maximum Call open interest is concentrated at the 24,000 strike, followed by 24,500 and 23,800, indicating stiff resistance in this range.

Support Levels: On the Put side, the 23,800 strike holds the highest open interest, followed by 23,500, reinforcing the importance of these levels.

Bank Nifty: Stuck Below 100-Day EMA

The Bank Nifty struggled to sustain above the 100-day EMA (51,635) and remained rangebound with a negative bias, eventually closing 62 points lower at 51,171. A bearish candlestick with significant shadows suggests heightened volatility.

Key technical highlights for Bank Nifty:

Support: The 200-day SMA at 50,560 is expected to act as a strong support zone.

Resistance: The 100-day EMA at 51,635 marks the upper boundary.

Hrishikesh Yedve, AVP of Technical & Derivatives Research at Asit C Mehta Investment Intermediates, predicts a short-term consolidation phase between 50,550-51,650, with a breakout in either direction deciding the next trend.

Volatility Index (India VIX): A Bullish Signal?

The India VIX, a measure of market volatility, rebounded sharply by 6.51% to 14.03, following a two-day decline. Despite this rise, the levels remain relatively favorable for bulls, indicating reduced fear in the market.

Conclusion

The 23,850 level (200-day SMA) remains the pivot point for Nifty’s next directional move. Until this level is breached, traders should brace for continued rangebound activity. On the other hand, the Bank Nifty’s inability to hold above the 100-day EMA reflects the cautious sentiment prevailing in the banking sector.

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