NIFTY wrapped up a promising week of trade, with the index securing its highest weekly close in over ten weeks. The week began on a slightly cautious note, as prices witnessed some selling pressure during the initial sessions. However, a swift recovery from key support levels reignited bullish sentiment, paving the way for three consecutive sessions of gains. The sustained buying momentum helped the index end the week on a firm note at the 24270 mark, registering weekly gains of 0.90%.

After a sustained tug of war over the past two weeks, the technical setup for the frontline index appears to be turning in favor of the bulls, although the shift in control is yet to become decisive. Prices have now secured a close above the trading range of the previous two weeks, signaling a price breakout from the recent consolidation. Adding further strength to the emerging setup is the formation of a bullish breakaway gap, while a bullish crossover on the 14-day RSI further reinforces the improving momentum. The Point & Figure charts also echo this constructive view. On the daily 0.25% × 3 chart, the index has delivered a follow-through Double Top Buy breakout above its immediate 45-degree objective trendline after finding support near its 10-column moving average. This adds further conviction to the recovery from the swing lows registered earlier in May. Despite the improving technical structure, it would be premature to conclude that the index is completely out of the woods. A series of sturdy resistance zones still lie ahead and could make the journey higher volatile and uneven. Moreover, the recent underperformance of BANKNIFTY, following its strong rally over the past few weeks, has tempered the overall bullish sentiment. The NIFTY Midcap index, which has been a clear outperformer, is also trading close to a key resistance zone. A decisive breakout above its recent swing highs would further broaden market participation, strengthen the overall bullish case, and firmly place the bulls in the driver’s seat. In such a scenario, adopting a buy the dips approach to key support can be considered. The 24180-24100 zone, which was a prior resistance, is now an immediate support cluster, followed by a stronger support in the 23850-23800 band. On the flips side, the 24400-24450 zone is an immediate resistance, followed by a stronger hurdle across the 24550-24600 zone.

With the MIDCAP index still struggling to break above its recent swing highs and considering the strong rally witnessed across many stocks over the past month, it would be prudent to avoid adopting an overly aggressive approach at this juncture. Instead, participants should focus on stocks offering a favorable risk-reward setup and preferably look to initiate fresh positions only on retracements towards key support levels, rather than chasing momentum at higher levels.

Key levels to watch

NIFTY

Support: 24180 – 24100

Resistance: 24400- 24450

BANKNIFTY

Support: 57850 – 57450

Resistance: 58425 – 58700

Hitesh Rathi, Technical Analyst -Equity & Derivatives, Angel One.