Trade Setup for October 16: Nifty breaking and sustaining above 25,350 key for further upside

After two sessions of profit-booking, the Nifty 50 resumed its uptrend and witnessed a sharp rebound on Wednesday, closing higher by 178 points.

After opening on a positive note, the market saw a sustained upmove for most of the session. Intraday dips were bought into, helping the Nifty end the day near its highs.

A long bull candle formed on the daily chart, indicating a strong counterattack by the bulls after a brief phase of weakness on Tuesday.

Among Nifty constituents, Bajaj Finance, Nestle India, and Bajaj Finserv emerged as the top gainers, while Infosys, Bajaj Auto, and Tata Motors ended as the major laggards.

Buying was broad-based, marking a complete reversal of the previous day's selling. Except for Nifty Media, all sectoral indices closed in the green, led by Realty, PSU Bank, and Metal, which recorded the highest gains.

The Nifty Midcap 100 and Smallcap 100 indices also rallied in tandem with the benchmark.

According to Nagaraj Shetti of HDFC Securities, the Nifty is now positioned near a breakout zone of multiple resistance levels, including a down-sloping trend line, previous swing high, and the upper range of recent sessions, around the 25,400-25,500 mark.

He added that the underlying trend remains positive, and a decisive breakout above 25,500 could open the way for an upside towards 25,700-25,800 in the near term, with immediate support at 25,200.

Sudeep Shah of SBI Securities said that 25,450 will act as an immediate resistance, coinciding with the previous swing high of September 18. A follow-through move above this level could extend the pullback to 25,650, while the 25,200-25,150 zone will act as crucial support.

According to Rupak De of LKP Securities, the Nifty moved up smartly, shaking off the previous session's weakness to close above the 25,250-25,300 resistance zone. In the short term, he expects the index to move towards 25,500-25,600, while a fall below 25,250 could trigger a short-term correction.

Meanwhile, Nandish Shah of HDFC Securities believes that a sustained move above 25,400 would mark a technical breakout, potentially pushing the index towards 25,669, with support now shifting higher to 25,150.