NIFTY50's shooting star pattern, BANK NIFTY consolidates near budget day low

Asian markets update 7 am

The GIFTY NIFTY is trading flat, suggesting a subdued start for the Indian equities on Tuesday. Meanwhile, Asian markets are trading mixed. Japan's Nikkei 225 fell 0.6%, while Hong Kong's Hang Seng Index rose 1%.

U.S. market update

US stocks fell on Monday after the Federal Reserve Chairman Jerome Powell reiterated in an interview that the central bank is unlikely to cut interest rates in March. This led traders to lower their expectations for a rate cut in May as well. The 10-year Treasury yield rose to 4.17%.

The Dow Jones dropped 0.7% to 38,380 and the S&P 500 fell 0.3%, ending the day at 4,942. The tech-heavy Nasdaq Composite declined 0.2% to 15,597.

NIFTY50

February Futures: 21,803 (▼0.7%) Open Interest: 2,35,857 (▼0.1%)

The NIFTY50 index started Monday’s session strongly but took a nosedive in the final hours, closing below Friday's low and confirming the bearish shooting star pattern. Despite the fall, the index remains above its key 20-day moving average (20-DMA), providing a potential support level for traders to watch.

Among the sectors, Pharma (+1.7%), Oil & Gas (+1.4%) and Auto (+1.2%) led the gains, while FMCG (-0.7%), Financials (-0.5%) and IT (-0.4%) weighed on the index.

As highlighted in yesterday's blog, the NIFTY50 on Monday confirmed the bearish reversal pattern by closing below Friday's close. However, the 20-DMA continues to provide technical support. As shown in the chart below, the chart shows several potential support levels below the 20 DMA, including the 50 DMA.

As per the open interest, the maximum call base for February 8 expiry is present at 22,000 and 22,100 strikes. On the other hand, the put options have base at 21,000 and 21,700 strikes. As per the option premiums and open interest, traders are expecting NIFTY50 to trade between 22,300 and 21,300.

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

BANK NIFTY

February Futures: 46,040 (▼0.6%) Open Interest: 1,85,646 (▼2.1%)

The BANK NIFTY index continues to face selling pressure and is range-bound between its 50 and 200 DMAs. As noted in yesterday's analysis, the index is encountering strong resistance above the 46,500 level. According to the experts, it's forming a potential base around the 45,600 level (Budget day low), which acts as immediate support. On the other hand, if the index falls and closes below budget day’s low, the next critical support level will be at the 200 DMA, which is currently around 44,800 and has already been tested once.

On the options front, the BANK NIFTY call options have significant open interest at the 47,000 and 46,500 strikes for the February 7 expiry. Conversely, the put options have the highest open interest at the 44,000 and 45,500 strikes. Based on the options data, the BANK NIFTY's trading range for the February 7 expiry could be between 47,200 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 (FIIs) bought shares worth ₹518 crore, while the Domestic Institutional Investors (DIIs) sold shares worth ₹1,188 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: Indian Oil Corporation, Tata Motors, Multi Commodity Exchange, Lupin and Ashok Leyland.

Short build-up: UPL, Aurobindo Pharma, Bharti Airtel and PI Industries.

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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