Technical View: Short-term outlook for Nifty is positive as long as it holds 22,800, say analysts
A decisive breakout of 23,200 could pull Nifty towards 23,500-23,600 levels in a quick period of time, said an analyst
Benchmark indices Sensex and Nifty extended their gains and closed above key psychological levels on October 30, supported by continued buying interest in large-cap stocks. However, Brent crude oil prices remained elevated, keeping macroeconomic concerns and investor caution intact. The Nifty 50 gained 0.51% to close at 23,053, while the Sensex rose 0.42% to 74,459. On the sectoral front, IT, Pharma and Financial Services were the key gainers, while Media, Energy, PSU Banks and Auto remained the major laggards.
The broader market underperformed the frontline indices, with the Nifty Midcap 100 declining 0.93% and the Nifty Small cap 100 falling sharply by 1.85%, indicating continued selling pressure in mid- and small-cap stocks. Regarding short-term outlook for the benchmark index Nifty, analysts said upside could be expected as long as it holds the 22,800-mark. "After a few sessions of consolidation, Nifty witnessed a breakout on Thursday, closing above the crucial 22,800 level and decisively reclaiming its 20-DMA.
The RSI has also entered a bullish crossover, indicating improving momentum. On the 3-hour chart, a symmetrical triangle pattern is developing, with a breakout above 23,250 required for confirmation. The short-term outlook remains positive as long as the index sustains above 22,800. Traders can consider booking partial profits near 23,250 while holding the remaining long positions with a trailing stop-loss of 22,950," said Vatsal Bhuva, Technical Analyst at LKP Securities.
"Index formed a high wave candle with a higher high and a higher low signaling extension of the pullback for the second session in a row. It started the session on a flat note and gained momentum as the session progressed to form an intraday high of 23,118 in the midsession. However, profit booking at higher levels saw the index gave up some of its gains and closed the session at 23,010 levels. Index sustaining above Friday’s low of 22,905 will signal extension of the current pullback towards 23,150-23,200 levels.
While a breach below 22,900 will signal some consolidation in the range of 22,900-22,600. "The immediate short-term bias remains corrective below the 23,175–23,250 resistance zone, marked by the confluence of last month’s high and the 50-day EMA, a sustained breakout above this zone would signal a pause in the downtrend," said Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking. "Nifty is now nearing an important overhead resistance around 23,200 levels (key resistance as per change in polarity).
Hence, there is a possibility of consolidation or minor dip from the highs in early next week before surging higher. However, a decisive breakout of 23,200 could pull Nifty towards 23,500-23,600 levels in a quick period of time. Any correction from highs could find support around 22,800," said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities. "We are of the view that the short-term texture of the market is positive, but buying on dips and selling on rallies would be the ideal strategy.
On the downside, for the Nifty, 22,800 and the 20-day SMA (Simple Moving Average), or 22,700, and for the Sensex, 74,000 and 73,500, would act as key support zones. As long as the market holds these levels, the uptrend will remain intact. On the higher side, 23,175/74,800 would be the immediate resistance zone for the bulls. "A successful breakout above 23,175/74,800 could push the market up to 23,350/75,200.
Further upside may also continue, which could lift the index to 23,500/75,500. On the flip side, below the 20-day SMA, or 22,700 for the Nifty and 73,500 for the Sensex, the uptrend would become vulnerable. Below these levels, traders may prefer to exit their long trading positions," said Amol Athawale, VP Technical Research, Kotak Neo.
