NIFTY50 forms a shooting star, BANK NIFTY faces rejection from 50 DMA. What’s next?

Asian markets update 7 am

Indian markets are expected to open flat to slightly negative today, with the GIFTY NIFTY currently down 50 (-0.2%) points. Asian markets are mixed, with Japan's Nikkei 225 up 0.3% and Hong Kong's Hang Seng Index down nearly 1%.

U.S. market update

U.S. stocks ended Friday on a triumphant note, fuelled by surging tech titans such as Meta Platforms and Amazon. The Dow Jones and S&P 500 recorded fresh closing highs, rising 0.4% and 1.1% respectively. The tech-heavy Nasdaq Composite soared even higher, hitting a new 52-week closing high and gained 1.7%.

NIFTY50

• February Futures: 21,951(▲0.9%)
• Open Interest: 2,36,139 (▲4.0%)

While the NIFTY50 had a strong start after the Budget, hitting a new all-time high, the celebrations were short-lived. A sharp sell-off in the second half of the session resulted in a shooting star pattern on the daily chart, indicating a potential bearish reversal.

According to technical analysts, the bullish momentum depends on a breach of 21,126, and a close above this level would negate the reversal signal. Conversely, a close below the Friday’s closing price confirms the shooting star pattern. Traders should monitor the price action near the 20-day moving average (DMA). A close below this important support level would strengthen the bearish outlook.

As per the open interest, the maximum call base for February 8 expiry is present at 22,200 and 22,000 strikes. On the other hand, the put options have base at 21,600 and 21,500 strikes. As per option premiums and open interest, traders are expecting NIFTY50 to trade between 22,400 and 21,300.

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

BANK NIFTY

• February Futures: 46,236 (▼0.4%)
• Open Interest: 1,89,724 (▼6.5%)

In line with our analysis of February 2, the BANK NIFTY encountered strong resistance at its 20 and 50 DMAs, erasing all its gains. Private sector giants HDFC Bank (-1.3%) and Axis Bank (-1.5%) led the decline with sharp sell-offs.

Going forward, the index will react strongly to State Bank of India's results today. The heavyweight's net profit fell 35% YoY to ₹9,164 crore on higher pension costs and wage revision. This could further weigh on sentiment.

Technically, experts point to a strong selling pressure above 46,500, in line with the 50 DMA (46,652). Following the rejection of both 20 and 50 DMAs, the next key support for the index is near the 200 DMA, which 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 45,000 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, both Foreign Institutional Investors(DIIs) and Domestic Insitutional Investors(DIIs) turned net buyers on Friday. The FIIs bought shares worth ₹70 crore, while DIIs purchased shares worth ₹2,463 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: Bharat Petroleum Corporation, Abbott India, GMR Airports Infrastructure, Hindustan Petroleum Corporation and Jindal Steel & Power.

Short build-up: City Union Bank and Tata Chemicals.

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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