Nifty Forms Inside Candle, Records Narrowest Range In Over Four Months

The Nifty 50 extended gains on Tuesday following Monday's rally, but traded within a narrow range as investors assessed whether the recent rebound had further room to run.

The benchmark index closed 135.25 points, or 0.57%, higher after opening on a firm note and briefly testing the 24,000 mark. It failed to hold above that level and settled just below it, maintaining a positive tone throughout the session while remaining range-bound.

The muted movement came after the previous session's sharp advance, suggesting a pause in momentum rather than a reversal. Technical indicators point to consolidation near a key resistance zone, with traders watching for a decisive breakout to determine the index's next move.

Inside candle points to consolidation

Tuesday's trading formed a positive daily candle alongside the red-bodied candle from the previous session. The Nifty moved within a range of 114.40 points, marking its narrowest daily range in more than four months.

The entire session remained within Monday's trading range, resulting in the formation of an inside candle and an NR7 pattern. The setup indicates compression following the recent rally.

The pattern emerged near the 61.8% Fibonacci retracement level of the decline from the April 21 high to the June 8 low. Open interest data indicated that the recent advance was largely driven by short covering. Expanding Bollinger Bands and rising short-term moving averages continued to support the prevailing structure.

Momentum indicators strengthen

Momentum indicators showed further improvement.

The MACD line moved closer to the zero line, while the histogram signalled a pickup in momentum. The 14-period RSI also approached bullish territory for the first time in more than six months.

On the hourly chart, the price structure resembled a cup-and-handle pattern.

Resistance zone remains critical

The Nifty faces resistance in the 24,000-24,127 zone, where several technical levels converge. These include the 61.8% retracement level, the May 26 swing high, the 20-week moving average and the May 11 gap area.

A decisive close above this range would allow the index to move beyond its previous swing high, fill the earlier gap and sustain levels above the retracement mark. Such a move could pave the way for an advance towards 24,462 and 24,600 over the short to medium term.

On the downside, Monday's low of 23,818 is expected to provide immediate support. Below that, Monday's gap area remains an important support zone. Failure to hold above this area could weaken the near-term setup.

Stock to watch: Bandhan Bank

Bandhan Bank has broken out of a 30-day ascending triangle pattern and moved above a six-week flat base, indicating renewed strength after a period of consolidation.

The relative strength line climbed to a new high, signalling outperformance against the broader market. Volumes remained above average during the past three sessions, lending support to the breakout. The stock also traded above its key moving averages and stood 13.52% above its 50-day moving average.

After a period of contraction, the Bollinger Bands began expanding, suggesting momentum was building. The moving average ribbon remained in an uptrend, while the MACD generated a fresh bullish signal. The RSI also returned to bullish territory.

Other momentum indicators supported the setup. The Stochastic RSI produced a fresh bullish signal, the KST approached a bullish crossover and the Elder Impulse System formed a strong bullish bar.

The stock's technical structure remained positive. A sustained move above Rs 216 could reinforce the breakout and open the way towards Rs 234 to Rs 242. On the downside, Rs 201 remains the stop-loss level.

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