Trade setup for February 25: Top 15 things to know before the opening bell

Nifty Trade Setup

The Nifty 50 fell sharply by 1 percent to hit its lowest level in more than eight and a half months on February 24, decisively breaking the 22,700 support and continuing its downward journey for five consecutive days. The sentiment has turned more bearish now, with the index trading at the lower line of the Bollinger Bands. Hence, any rebound is likely to be sold off from here on, according to experts. The next key support is placed at 22,400 (the 20-month EMA as well as the midline of the Bollinger Bands on monthly charts), as sustaining below it could lead to a further downward pressure on Dalal Street. However, on the higher side, the 22,700-22,800 zone is expected to act as a hurdle.

Here are 15 data points we have collated to help you spot profitable trades:

1) Key Levels For The Nifty 50 (22,553)

Resistance based on pivot points: 22,637, 22,672, and 22,729

Support based on pivot points: 22,523, 22,488, and 22,431

Special Formation: After a gap-down opening, the Nifty 50 formed a bearish candlestick pattern with a minor upper shadow on the daily charts, signaling weakness. The index reached the lower line of the Bollinger Bands, while the momentum indicators RSI (Relative Strength Index) at 29.74 entered oversold territory. The MACD (Moving Average Convergence Divergence) remained below the zero line with a negative crossover.

2) Key Levels For The Bank Nifty (48,652)

Resistance based on pivot points: 48,739, 48,849, and 49,027

Support based on pivot points: 48,383, 48,272, and 48,094

Resistance based on Fibonacci retracement: 49,397, 50,372

Support based on Fibonacci retracement: 47,880, 46,078

Special Formation: The Bank Nifty formed a small-bodied bullish candle with a minor upper and long lower shadow, resembling a Dragonfly Doji-like candlestick pattern (though not a classical one), which is a bullish reversal pattern. The index traded near the lower line of the Bollinger Bands, while the momentum indicators RSI and MACD reported a negative crossover, signaling weakness.

3) Nifty Call Options Data

According to the monthly options data, the 23,000 strike holds the maximum Call open interest (with 1.38 crore contracts). This level can act as a key resistance for the Nifty in the short term. It was followed by the 22,800 strike (1.32 crore contracts) and the 23,500 strike (1.07 crore contracts).

Maximum Call writing was observed at the 22,600 strike, which saw an addition of 86.26 lakh contracts, followed by the 22,800 and 22,700 strikes, which added 86 lakh and 83.49 lakh contracts, respectively. The maximum Call unwinding was seen at the 23,100 strike, which shed 26.41 lakh contracts, followed by the 23,450 and 23,550 strikes, which shed 3.34 lakh and 2.87 lakh contracts, respectively.

4) Nifty Put Options Data

On the Put side, the maximum Put open interest was seen at the 22,500 strike (with 96.48 lakh contracts), which can act as a key support level for the Nifty. It was followed by the 22,000 strike (88.36 lakh contracts) and the 22,600 strike (84.78 lakh contracts).

The maximum Put writing was placed at the 22,600 strike, which saw an addition of 46.53 lakh contracts, followed by the 22,550 and 22,650 strikes, which added 29.09 lakh and 25.65 lakh contracts, respectively. The maximum Put unwinding was seen at the 22,800 strike, which shed 21.81 lakh contracts, followed by the 22,900 and 23,000 strikes, which shed 13.57 lakh and 12.08 lakh contracts, respectively.

5) Bank Nifty Call Options Data

According to the monthly options data, the maximum Call open interest was placed at the 50,000 strike, with 22.69 lakh contracts. This can act as a key resistance level for the index in the short term. It was followed by the 50,500 strike (17.94 lakh contracts) and the 49,000 strike (16.16 lakh contracts).

Maximum Call writing was visible at the 48,500 strike (with the addition of 4.99 lakh contracts), followed by the 50,000 strike (4.44 lakh contracts) and the 50,500 strike (3.2 lakh contracts). The maximum Call unwinding was seen at the 50,700 strike, which shed 61,590 contracts, followed by the 50,600 and 49,100 strikes, which shed 60,930 and 14,910 contracts, respectively.

6) Bank Nifty Put Options Data

On the Put side, the 48,500 strike holds the maximum Put open interest (with 14.93 lakh contracts), which can act as a key support level for the index. This was followed by the 47,000 strike (13.8 lakh contracts) and the 48,000 strike (12.91 lakh contracts).

The maximum Put writing was observed at the 48,500 strike (which added 5.22 lakh contracts), followed by the 48,400 strike (4.19 lakh contracts) and the 48,600 strike (3.5 lakh contracts). The maximum Put unwinding was seen at the 49,000 strike, which shed 3.4 lakh contracts, followed by the 47,500 and 49,500 strikes which shed 2.08 lakh and 1.7 lakh contracts, respectively.

7) Funds Flow (Rs crore)

8) Put-Call Ratio

The Nifty Put-Call ratio (PCR), which indicates the mood of the market, dropped to 0.71 on February 24, against 0.82 in the previous session.

The increasing PCR, or being higher than 0.7 or surpassing 1, means traders are selling more Put options than Call options, which generally indicates the firming up of a bullish sentiment in the market. If the ratio falls below 0.7 or moves towards 0.5, then it indicates selling in Calls is higher than selling in Puts, reflecting a bearish mood in the market.

9) India VIX

The volatility index, India VIX, which measures expected market volatility, fell by 0.60 percent to the 14.44 zone, extending its downward move for five consecutive days and trading below all key moving averages. The VIX needs to decisively breach below 14 to bring the bulls into a comfort zone.

10) Long Build-up (22 Stocks)

A long build-up was seen in 22 stocks. An increase in open interest (OI) and price indicates a build-up of long positions.

11) Long Unwinding (93 Stocks)

93 stocks saw a decline in open interest (OI) along with a fall in price, indicating long unwinding.

12) Short Build-up (74 Stocks)

74 stocks saw an increase in OI along with a fall in price, indicating a build-up of short positions.

13) Short-Covering (43 Stocks)

43 stocks saw short-covering, meaning a decrease in OI, along with a price increase.

14) High Delivery Trades

Here are the stocks that saw a high share of delivery trades. A high share of delivery reflects investing (as opposed to trading) interest in a stock.

15) Stocks Under F&O Ban

Securities banned under the F&O segment include companies where derivative contracts cross 95 percent of the market-wide position limit.

Stocks added to F&O ban: Nil

Stocks retained in F&O ban: Chambal Fertilisers and Chemicals, Manappuram Finance

Stocks removed from F&O ban: Nil

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