Trading Plan: Can Nifty 50, Bank Nifty defend Tuesday’s low after stellar rally?

Nifty Trading Plan for February 4

• Market to see some consolidation with range-bound trading, though overall trend remains in favour of the bulls
• Bank Nifty needs to hold support of 59,800, as below it 59,450 is a crucial support
• Immediate hurdle for Bank Nifty seen at 60,200, followed by 60,437

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After a stellar run in the previous session, the indices are expected to see some consolidation with range-bound trading for next few days, though overall trend remains in favour of the bulls. The Nifty 50 is likely to defend the previous day’s low (25,641, which coincides with the 50-day EMA), signalling immediate key support, as holding consistently above it can open the door for a move toward 26,000, but below it, 25,500 is the level to watch. Meanwhile, the Bank Nifty needs to hold its support of 59,800 (previous day’s low), as below it 59,450 is a crucial support. However, the immediate hurdle is seen at 60,200, followed by 60,437, experts said.

On February 3, the Nifty 50 spiked 639 points (2.55 percent) to 25,728, while the Bank Nifty surged 1,422 points (2.43 percent) to 60,041. Market breadth turned strong, as about 2,494 shares saw buying interest against 447 shares that were under pressure on the NSE.

Nifty Outlook and Strategy

Ashish Kyal, CMT, Founder and CEO of Waves Strategy Advisors

Nifty opened with a massive gap-up near the 26,300 level, surging over 1,200 points after the announcement of the US–India trade deal, which is one of the sharpest gap openings in recent years. However, the index failed to hold higher levels and slipped to around 25,641 within the first hour. Thereafter, it moved in a narrow range between 25,870 and 25,700 for the rest of the session.

The zone near 25,728 stands out as a key volume profile support, marked by heavy historical participation. Broader markets also showed strength, with mid- and small-cap stocks outperforming. Technically, the sharp up-move has retraced nearly 14 days of prior correction in a single candle, which is a strong indication that a significant low is now in place.

The overall trend for Nifty has turned bullish. As long as the index holds above the key support of 25,361, the structure remains constructive. On the upside, the index is expected to progress towards the 26,200+ zone, while buying on declines remains the preferred strategy.

Key Resistance: 26,300

Key Support: 25,361

Strategy: Long positions can be created if the Nifty 50 moves towards 25,550–25,580 and reverses on the 5-minute chart, with a stop-loss of 25,361 and targets of 25,730 followed by 25,900 levels.

Aditya Thukral, Founder & Analyst of AT Research & Risk Managers

The Nifty 50 has managed to close above all the major EMAs, i.e., the 20-day, 50-day, 100-day, and 200-day EMAs, and the slope of these EMAs has also changed upwards, which is a positive sign. However, the index has to consistently close above 25,650 for another couple of days to further strengthen this upmove, which started just after the Budget announcement day. Market breadth improved drastically with Tuesday’s price action, and buying was seen across sectors.

Technically, follow-up buying has to be seen after a strong upmove. However, as a big gap-up was witnessed, a sideways action is definitely required, if not an immediate follow-up, to maintain further continuation of this uptrend.

On the derivatives front, there hasn’t been any directional signal, as aggressive option writing has been seen across the option chain, and the index is expected to remain sideways within the larger range of 25,500 and 26,000 for at least the next couple of days.

Key Resistances: 25,880, 26,150

Key Support: 25,600, 25,450

Strategy: Buy Nifty futures on dips around 25,680 with a stop-loss of 25,580, targeting 25,880.

Bank Nifty - Outlook and Positioning

Ashish Kyal, CMT, Founder and CEO of Waves Strategy Advisors

Post the STT hike, Bank Nifty saw a sharp sell-off on Budget Day, testing the lower boundary of its rising trendline on the daily chart. However, at the start of this week, the index staged a strong rebound of nearly 800 points from trendline support, reflecting buying interest at lower levels. In the previous session, Bank Nifty opened with a massive gap-up of around 2,800 points, boosting overall market sentiment.

PSU and private banks contributed equally to the rally, helping the index hit a fresh record high near 61,764 in early trade. After initial profit booking, prices moved sideways and are now hovering near the key polarity zone of 60,300. A break back above it can extend the rally further, followed by a fresh record high.

The Bank Nifty is at an important juncture. A break below 59,790 can result in an attempt at gap filling, while a break above 60,300 can result in a fresh course of buying.

Key Resistance: 61,700

Key Support: 58,700

Strategy: Long positions can be created above 60,300 with a stop-loss of 60,000 and a target of 60,850.

Aditya Thukral, Founder & Analyst of AT Research & Risk Managers

A breakout from the falling trendline has been witnessed in prices along with the 14-period RSI. The short-term trend of the banking index has also changed to positive, with the index hitting all-time highs with a gap-up opening. It managed to close above the 20-day EMA and 50-day EMA as well, which were proving to be resistances over the last few days. The formation of higher highs and higher lows across all timeframes signifies an established uptrend.

Follow-up buying seems to be emerging in the index, as positioning in the derivatives segment shows aggressive long build-up and short covering by traders.

Key Resistance: 60,300, 60,550

Key Support: 59,850, 59,500

Strategy: Buy Bank Nifty futures above 60,400 with a stop-loss of 60,150, targeting 60,900.