Technical View: Bears may gain strength only below 25,450; Nifty seen consolidating till then, Bank Nifty holds ground despite profit booking

Nifty outlook for February 6

• Immediate resistance for Nifty 50 seen at 25,700–25,800 zone
• Support seen at 25,500-25,450 zone
• VIX corrects 19.39% this week, signalling comfort for bulls

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The Nifty 50 snapped its three-day winning streak, falling half a percent after trading within the previous day’s range on February 5, as investors remained cautious ahead of the RBI monetary policy scheduled for February 6. The market is also cautiously awaiting details of the India–US trade deal announced on February 2. The index still managed to defend Tuesday’s low (i.e., the upper band of the bullish gap), though it closed marginally below the 50-day EMA.

Overall, the index remains in consolidation mode after Tuesday’s rally. However, if it decisively breaks and sustains below the 25,500–25,450 zone (which coincides with short-term moving averages and the midline of the Bollinger Bands), sharp selling pressure cannot be ruled out in the following sessions. On the higher side, 25,800 is expected to be the immediate resistance, followed by the 26,000 zone, according to experts.

The Nifty 50 opened moderately lower and extended its downtrend as the day progressed, hitting a day’s low of 25,580 in the later part of the session. In the last hour of trade, the index saw some buying interest and closed at 25,642.8 (which is marginally above Tuesday’s long candle low of 25,641.3), down 133 points (0.5 percent). However, the volume was lower compared to the previous session.

The index formed a bearish candle with a lower shadow on the daily charts within the previous day’s range, signalling consolidation. The index still held above short-term and lower-term moving averages, with short-term moving averages trending upward. The MACD maintained a bullish crossover with a further rise in the histogram, and the Stochastic RSI also sustained a positive crossover. The RSI held above the signal line, though it inclined slightly downward. All this indicates mixed but broadly supportive technical conditions.

The huge opening upside gap of Tuesday has been partially filled after three sessions of its formation. If the said gap remains partially filled for the next couple of sessions, then it could be considered a bullish runaway gap, which is normally formed in the middle of an uptrend, said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

Hence, a sustainable move above 25,800 is likely to open more upside in the near term, he feels.

Weekly options data suggested immediate resistance for the Nifty 50 at the 25,700–25,800 zone, with support at the 25,500 level, as a decisive break on either side can give a firm direction to the index.

The maximum Call open interest was placed at the 26,000 strike, followed by the 25,800 and 25,700 strikes, with the maximum Call writing at the 25,700, 26,000, and 25,800 strikes. On the Put side, the 25,000 strike held the maximum Put open interest, followed by the 25,500 and 25,600 strikes, with the maximum Put writing at the 25,000, 25,400, and 25,100 strikes.

Meanwhile, the India VIX, also known as the fear gauge, maintained a downtrend since the beginning of the current week, falling below the 200-day EMA with a 0.7 percent decline to 12.17, signalling further comfort for bulls. It was down 19.39 percent in the current week.

Bank Nifty

The Bank Nifty also saw a correction for the first time in the last four straight sessions, falling 174 points (0.3 percent) to 60,064, but it continued to defend the falling support trendline on a closing basis for the third consecutive session. This suggests that a decisive break below it could bring bears back. The index also still held above all key moving averages, with short-term moving averages trending higher.

Momentum indicators also remained positive, with the RSI sustaining above the reference line, though inclined downward. The MACD sustained strongly above the signal line with a further uptrend in the histogram.

“Looking ahead, the 59,600–59,500 zone will act as a key support area for the index,” said Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities.

On the upside, the region between 60,300–60,400 remains the immediate resistance, and a breakout above this band may revive upward momentum, he added.