Trade Setup for May 22: Nifty breaks the lower-high streak but 23,800 remains a roadblock

The Nifty has not moved an inch for the last five sessions, even after trading in a 500-point range. It has tested the lower and the higher end of the range multiple times this week, but by the end of the session, it lands up at the same mid-point of the range that it closed with last Friday.

The market is in need of a major directional trigger on either side. It has almost stopped reacting to global developments. Wednesday's cues were negative, but the Nifty returned to status quo after the initial gap down. Thursday's cues were positive or borderline hopeful. Yet, the gap up did not sustain and it returned back to the same 23,600 - 23,650 zone that it has been meandering in all through the week.

It has been seven sessions that the Nifty has closed between 23,600 and 23,700. During this period, it has crossed 23,800 twice, failed to sustain above it on both instances, and also broke below the 23,400 mark, and failed to decisively move lower either. Such has been the price move that the gains made by the Nifty this week, is a whopping 11 points.

The only positive, if one could call it that from Thursday, is the fact that the Nifty made a higher-high on the daily chart for the first time in five sessions, albeit, it failed to sustain that too.

Sustaining above the 50-DMA is key for the Nifty so that it can prepare itself for a move back towards the 20-DMA mark, which is above levels of 24,000. To end the week with gains, the Nifty needs a close above the 23,643 mark.

The final trading session is not going to be devoid of action by any means. Earnings reactions continue, as does monitoring of the developments in West Asia, the elevated oil prices, a volatile rupee, and the final Friday before next week's monthly expiry.

Friday's session will see the market react to analyst commentary on ITC's results for the March quarter, along with numbers reported by Aurobindo Pharma, LIC, Bikaji Foods, LG Electronics India, Honasa Consumer, and others that reported results after market hours on Thursday.

Sun Pharma, Hindalco, Torrent Pharma, Info Edge, Colgate-Palmolive, Eicher Motors, Fortis, Indigo Paints are some of the important results that will be reported on the final trading day of the week.

Key Levels To Watch

"The overall sentiment continues to remain weak, with the possibility of further downside in the short term. On the lower end, 23,400 is likely to act as a crucial support level; a decisive breach below this mark may trigger panic selling in the market. Conversely, the index needs to move decisively above 23,800 to witness a directional rally and improve the near-term sentiment," Rupak De of LKP Securities said.

HDFC Securities' Nagaraj Shetti maintains that the underlying Nifty trend remains choppy and only a decisive move above the 23,850 - 23,900 levels will open a broad-based buying trend in the market for the near-term. He anticipates a move back towards the 23,500 level in case of further weakness from these levels.

The Nifty Bank too, like the Nifty, tested both ends of its 53,000 - 54,000 range and yet again settled at the mid-point of that. The index also made a higher-high for the first time in five trading sessions. The range for the index remains within the same 1,000 points. Unlike the Nifty, the Nifty Bank has had a down week so far, and will need a close above 53,710, to reverse those gains.

"Going ahead, the 53,900 – 54,000 zone is likely to act as an immediate resistance. On the downside, the 53100–53000 zone is expected to provide crucial support. A decisive break below the 53,000 level could further intensify selling pressure, dragging the index towards the next key support at around 52,400," Sudeep Shah of SBI Securities said.