NIFTY50 recovers with bullish candle, 21,600 emerges as strong support

Asian markets update 7 am

Indian equities are set for a positive start, with GITY NIFTY trading at 21,997, up 0.3%. This follows gains in the Asian markets, where Japan's Nikkei advanced 0.9%, while Hong Kong’s Hang Seng index rose 0.2%.

U.S. market update

U.S. stocks closed higher on Wednesday after digesting a hotter than expected inflation report. Despite this, traders are still pricing in a 40% chance of an interest rate cut in May. The Dow Jones Industrial Average rose 0.4% to 38,424, while the S&P 500 reclaimed the 5,000 level with a 0.9% gain. The tech-heavy Nasdaq Composite was up 1.3% at 15,859.

NIFTY50

• February Futures: 21,916 (▲0.4%)
• Open Interest: 2,36,366 (▼1.4%)

The NIFTY50 index witnessed support based buying near its 50-day moving average (DMA) and recovered over 300 points from its intraday low, to close higher. The index also confirmed the hammer candlestick pattern, which is considered as the reversal pattern and closed above the high of the last three days. The sharp upmove was aided by rebound in banking and oil & gas stocks.

As highlighted in our yesterday’s trade setup blog, the index has a strong support at its 50-DMA, which is around 21,500. However, experts believe that the index is still oscillating in the broader range of 22,126 (all-time high) and 21,100. Traders are advised to monitor the price action near the 22,000 mark for further directional clues. Meanwhile, for today’s expiry the immediate support is at 21,700 which coincides with its 20-DMA and resistance remains at all-time high.

Open interest data for today's NIFTY50 expiry shows significant call base at the 22,000 and 22,200 strikes. Conversely, there has been fresh put writing at the 21,600 and 21,500 strikes, which hold the largest put base. This suggests that market participants expect the NIFTY50 to trade in a range of 21,500-22,200 for today’s expiry.

BANK NIFTY

• February Futures: 46,089 (▲0.9%)
• Open Interest: 2,07,971 (▼5.8%)

The BANK NIFTY held its 200 DMA for the fifth consecutive day and staged a sharp recovery of over 1000 points from intraday low. As highlighted in yesterday's morning blog, the index formed a bullish Harami candlestick pattern on the daily chart. This reversal pattern was confirmed when the index closed above the last three days' high, although just below the key resistance level of 46,000.

Experts believe that with a strong rebound in PSU banks and some private banking heavyweights, the index could extend this rally towards 46,500 if it closes above the 46,000 mark on a daily closing basis.

For BANK NIFTY's February 21 expiry, the initial options build-up shows high open interest at the 48,000 & 46,000 call option strikes and 45,000 & 44,000 put option strikes. Based on the open interest, traders eye BANK NIFTY trading range between 47,800 and 44,400 for February 21 expiry.

FII-DII activity

In the cash market, the Foreign Institutional Investors (FIIs) sold shares worth ₹3,929 crore, while the Domestic Institutional Investors (DIIs) bought shares worth ₹2,897 crore. To track the ratio of long and short open positions of FIIs in the index, log in to https://pro.upstox.com/ ➡️F&O➡️FII-DII Activity➡️FII Derivatives

Stock scanner

Long build-up: Hindustan Petroleum, Hindustan Copper, Vedanta and ONGC.

Short build-up: Info Edge( Naukri), L&T Technology Services, Glenmark Pharma and Tech Mahindra.

Catch up on yesterday's NIFTY 200 insights! Don't miss our market recap blog, offering valuable insights in a concise format. Click here to read and stay informed.

To access a specially curated smartlist of most traded and active stocks, as well as the OI gainers and losers, simply log in: https://pro.upstox.com/ ➡️F&O➡️Options smartlist/Futures smartlist

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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