The Nifty50, which fell more than 100 points on the F&O expiry day on January 28, made a Doji pattern on the daily charts. The index broke below its crucial support at 13,900 and below its 5-Days EMA.
The supertrend indicator also gave a sell signal on the daily charts. MACD gave a sell signal on January 21.
The Nifty50 fell more than 1 percent or 149 points to close at 13,817. The index retested 13,700 levels but the bulls managed to push the index above 13,800.
Experts said traders to stay cautious in the run-up to the budget to be presented on February 1. Traders could look at shorting the index below 13,700, while signs of strength will only be visible above 13,900-13,929.
“The Nifty50 registered a Doji kind of formation as it smartly recoiled to sign off the expiry session around the opening tick after testing the 50-day simple moving average, whose value was placed around 13,700 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
The Nifty will remain under pressure unless it bridges the bearish gap in the 13,898–13,929 zone, which it registered in the expiry session. The Nifty should stay above 13,700 and a failure to do so would extend the weakness to 13,455, he said.
Considering the major economic events lined up in the next two sessions, traders are advised to remain neutral on markets. Intraday traders with a high-risk appetite can consider shorting below 13,700 for a modest target in the 13590–550 zone, placing a stop above the intraday high.
If the index defends 13,700, consolidation in the 13,900–13,700 zone can be expected. A close above 13,929 can be considered as an initial sign of strength, which can unfold a pullback swing towards 14,250 levels.
India VIX fell by 0.41 percent from 24.39 to 24.29 levels. A surge in volatility due to selling pressure and in the run-up to the budget could keep limit the upside.
Since it is the beginning of new series, the options data is scattered at different strikes. On the options front, maximum Put OI is placed at 14,000 followed by 13,000 strikes, while maximum Call OI is placed at 14,500 followed by 15,000 strikes.
Options data suggests a wider trading range in between 13,500 and 14,500 ahead of the budget event.
“The Nifty formed a Doji candle on the daily scale after four consecutive bearish candles, indicating a tug of war between the bulls and bears with some support zones. The index may continue to remain highly volatile ahead of the Union Budget 2021,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited told Moneycontrol.
“Now, as long as it remains below the 14,000 zone, a bounce could be sold and weakness may be seen towards 13,700 and 13,500, while on the upside, key hurdle exists at 14,000 and 14,200 levels,” he said.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.