Trade setup for Feb 4: NIFTY50 protects 21 EMA, but 23,500 looms as key resistance

Asian markets

GIFT NIFTY:23,536 (+0.51%) Nikkei 225: 39,175 (+1.63) Hang Seng: 20642 (+2.0%)

U.S. market update

Dow Jones: 44,421 (▼0.2%) S&P 500: 5,994 (▼0.7%) Nasdaq Composite: 19,391 (▼1.2%)

U.S. indices closed lower but recovered from the session’s low after President Trump said on Monday that he would pause new tariffs on Mexico for a month, although tariffs on China and Canada will still go into effect on Tuesday.

The Consumer discretionary stocks, which include carmakers, were hit on fears over the impact of the tariffs. Technology sector also lagged as shares of AI chip giant Nvidia, Apple and electric car maker Tesla all fell more in the range of 2.5% to 5%.

NIFTY50

February Futures: 23,422 (▼0.4%) Open interest: 2,28,341 (▼1.5%)

Amid weak global cues, the NIFTY50 index started the February 3 session on a negative note and slipped below the crucial support zone of 21-day exponential moving average (EMA). However, the index rebounded from the day’s low and protected the 23,300 support zone on closing basis, indicating support based buying.

The index is currently trading near its 21-day EMA on the daily chart, which may provide immediate support. Conversely, the 23,600-23,700 zone, coinciding with the 50-day and 200-day EMAs, presents a significant resistance area.

The open interest data for the 6 February expiry saw significant call build-up at 23,500 strike, suggesting resistance for the index around this zone. On the other hand, the put base was seen at 23,000 and 23,300 zone, hinting at support for the index around these zones.

SENSEX:

Max call OI: 78,000 Max put OI: 76,000 (20 Strikes from ATM, Expiry: 4 Feb)

The SENSEX also started the week on a negative note and slipped below the crucial support zone of 77,100. However, the index recovered its opening losses in the second half of the session and protected the 21-day EMA and 77,100 zone on closing basis.

Meanwhile, the price action of the SENSEX on the 15 minute chart turned range-bound after opening below the rising channel pattern discussed in our 3 February’s trade setup blog. As highlighted on the chart below, traders can monitor the price action of the index around 78,000 and 76,800 zone. A break of this zone during intraday will provide short-term clues.

The open interest activity of the index for 4 February’s expiry saw significant call build-up at 78,000 strike, marking this as the immediate resistance zone for the index. Conversely, the put base was seen at 77,000 with low volume, indicating immediate support for the index around this zone.

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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