Trade setup for 19 January: NIFTY50 forms Doji, Bank Nifty falls below 50 DMA

Asian markets update 7 am

The GIFT Nifty is trading 12 points lower, suggesting a flat to positive start for the NIFTY50 today. Meanwhile, Japan’s Nikkei 225 and Hong Kong’s Hang Seng index are up 1% and 0.5% respectively.

US market update

The US markets rebounded on Thursday, erasing earlier losses fuelled by a rally in technology stocks. After three days of declines, the Dow Jones gained 0.5% to close at 37,468. The broader S&P 500, driven by mega tech stocks, rose 0.8% to 4,780. The tech-heavy Nasdaq Composite led the way, rising 1.3% to 15,055 and recouping all of the previous week's losses.

NIFTY50 January Futures: 21,527 (▼0.1%) Open Interest: 2,21,795 (▼0.6%)

The Nifty50 index closed lower for the third consecutive day, down nearly 3% from Tuesday's close. However, after opening lower, it managed to recover from the day's low and recovered most of its losses. Among the sectors, Financial Services (-1.0%), Metal (-0.8%) and IT (-0.6%) dragged the index lower. Meanwhile, Pharmaceuticals (+1.0%) and Oil & Gas (+0.6%) contributed to the gains.

The index formed a doji candle on the daily chart and faced selling pressure around the 21,500 level. Experts believe that the index may see a pullback after falling sharply below its 20-day moving average (DMA). However, it will need to regain the 20 DMA in order to make further gains. It is important to note that the doji is a neutral candlestick pattern. The subsequent close will be pivotal in confirming or negating future price action.

On the options front, the highest open interest for call options is placed at 22,000 and 21,800 strikes. On the other hand, highest open interest for put options lies at 21,000 and 21,400 strikes for 25 January expiry. As per the options data, the trading range for NIFTY50 could be confined between 21,900 and 21,000.

You can track open interest of the NIFTY50 here: https://pro.upstox.com/

BANK NIFTY January Futures: 45,869 (▼0.6%) Open Interest: 1,47,319 (▼8.5%)

The Bank Nifty fell close to its 100-day moving average (DMA) after a second consecutive gap down opening. After briefly recouping initial losses in the first half of the session, selling pressure emerged around 46,000 mark. Despite the decline, the index formed an inverted hammer on the daily chart, a candlestick pattern often interpreted as a bullish reversal signal. It is important to note that the confirmation of the inverted hammer happens when the price of the following day closes above the high of the inverted hammer.

On the options front, the BANK NIFTY call options have the highest open interest at the 47,000 and 46,500 strikes. Conversely, the highest open interest for the January 25 put options is at the 46,000 and 45,000 strikes. Based on the options data, the trading range for BANK NIFTY could be confined between 47,000 and 44,500.

You can track open interest of the BANK NIFTY here: https://pro.upstox.com/

FII-DII activity

In the cash market, the Foreign Institutional Investors(DIIs) sold shares worth ₹9,091 crore, while the Domestic Insitutional Investors(DIIs) bought shares worth ₹5,977 crore. To track the ratio of long and short open positions of FIIs in the index, log in to https://pro.upstox.com/

Stock scanner

Long build-up: Oracle Financial Services Software, Apollo Tyres, Bharat Heavy Electricals and Persistant Systems.

Short build-up: LTIMindtree, ICICI Prudential, RBL Bank and NTPC.

In Futures and Options or F&O, long build-up means an increase in Open Interest (OI) along with an increase in price, and short build-up means an increase in Open Interest(OI) along with a decrease in price.

Source: Upstox and NSE.

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