Trading Plan: Can Nifty 50 manage to defend 100-week EMA, Bank Nifty reclaim 5-day EMA?

Nifty Trading Plan

The Nifty 50 remained under the control of bears for the tenth consecutive day, despite bulls making an attempt to support and lift the index back above the 22,000-22,040 range (which coincides with the 100-week EMA) on a closing basis on March 4. According to experts, there is still a possibility of a bounce given the oversold conditions, but the bears continue to dominate. If the index breaks 22,000 on a closing basis, selling pressure may drive the index down to 21,900-21,800. However, sustaining above 22,000 could propel the index toward 22,250-22,300 (which coincides with the 5-day EMA or Monday’s high). If the Bank Nifty closes and holds above 48,400 (5-day EMA), levels to watch are 48,700-49,000, while crucial support is placed at 47,800.

On Tuesday, March 4, the Nifty 50 closed off the day's low at 22,083, down by 37 points, while the Bank Nifty rebounded 131 points to 48,245. The market breadth improved with 1,573 advancing shares versus 1,066 declining shares on the NSE.

Nifty Outlook and Strategy

Vinay Rajani, Senior Technical & Derivative Analyst at HDFC Securities

Out of the last 19 trading sessions, only one session has ended in positive territory. The Nifty has been closing below its 5-day exponential moving average (DEMA) since February 6, 2025. The 14-day Relative Strength Index (RSI) for the Nifty has dropped to 21, the lowest level since March 2020. The percentage of members above their 200-day SMA in the NSE500 has reached 10, indicating an extreme oversold condition in the markets. All these developments suggest that the index is in an extremely oversold condition. Nifty continues to be in a downtrend, with 21,750-21,800 serving as a potential support level. On the upside, the 5-day EMA is positioned near 22,260, which could act as a short-term resistance level.

Markets are clearly in a downtrend, but considering the oversold conditions in most benchmark indices, we cannot rule out the possibility of a pullback from the current levels. The positional trend of Nifty will remain bearish until it closes above 22,800 on the upside. Short-term support is seen near 22,000, below which it could slide down to the next support zone of 21,800-21,550. These support and resistance levels should be used to initiate and square off trading positions.

Key Resistance: 22,260, 22,800

Key Support: 22,000, 21,800

Strategy: Buy Nifty Futures above 22,250, with a stop-loss at 22,000, targeting 22,700.

Preeti K Chabra, Founder of Trade Delta

The Nifty is trading in a downward trending channel and has failed to close above the high of the previous day since February 5, indicating the strength of bears over bulls. As a result, the market continues to exhibit a sell-on-rise pattern. However, if we analyze the RSI, the Nifty is trading at 21.70, which falls into the oversold zone, suggesting that a bounce may be expected at this level. It is finding some support at 21,947, the lower end of the Bollinger Bands chart, which again gives an indication of a potential bounce. In the options chain, we see unwinding in-the-money Puts (ITM Puts), suggesting a bearish scenario.

Going forward this week, we expect some tug-of-war between bears and bulls, as technical indicators are giving mixed signals. To take advantage of the expected consolidation, we can deploy an Iron Butterfly strategy at 22,100.

Key Resistance: 22,260, 22,444

Key Support: 22,000, 21,800

Strategy: Deploy an Iron Butterfly strategy for potential gains from the expected consolidation trend in Nifty. In a straddle, the trader sells both a Call and a Put at the same strike price to receive premiums on both positions. This strategy is usually deployed when expecting the underlying to close in a range. For conservative traders, it is advisable to buy hedges for protection, thereby converting the straddle into an Iron Butterfly.

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

Since the start of February, the decline that the Nifty has witnessed is one of the steepest drops since the Covid crash. The daily RSI reading of 21 has not been seen since the March 2020 lows.

In the previous session, the Nifty crossed below the 22,000 mark for the first time since June 2024 amid tensions over the global tariff war. Bears have tightened their grip with each passing day. Over the last 19 trading sessions, the Nifty has not closed above the prior day’s high, indicating that the daily trend is on the side of the bears. This is a powerful technique for assessing the trend. For now, a break above 22,300 is needed for some stability. To see a deeper positive retracement, a close above the prior day’s high is necessary; until then, use pullbacks to sell for a move to 21,820-21,800 levels.

In summary, the Nifty’s trend remains negative. If it breaches below 21,960, it can accelerate selling pressure, potentially dragging the price lower toward 21,800. On the upside, a break above 22,300 is essential for some stability.

Key Resistance: 22,300

Key Support: 21,700

Strategy: Short positions in Nifty Futures can be created below 21,960 with a stop-loss at 22,100 and a target of 21,820, followed by 21,700.

Bank Nifty - Outlook and Positioning

Vinay Rajani, Senior Technical & Derivative Analyst at HDFC Securities

The Bank Nifty has been finding support near 47,800 levels. The primary trend remains bearish as the index has been trading below all important moving averages. Any level below 47,800 could drag the index toward 46,600. On the higher side, the index may face resistance at 48,972 and 49,600.

Key Resistance: 48,972, 49,600

Key Support: 47,800, 46,600

Strategy: Buy Bank Nifty Futures above 48,500, with a stop-loss at 47,800, targeting 49,500.

Preeti K Chabra, Founder, Trade Delta

The Bank Nifty has been trading in a downward trending channel since February 7 and has failed to close above the high of the previous day 16 times in the last 17 trading days, suggesting the strength of bears over bulls. However, on the downside, the Bank Nifty has found support at 47,840 multiple times and bounced back from this level again on Monday. On Tuesday, it made an open = low at 47,924, which is a bullish indication suggesting buying at this level. The Bank Nifty is trading with an RSI of 37.76 and has found support from the RSI zone of 35.5, with an upward trend suggesting a potential bounce. On the Bollinger Band, the Bank Nifty is finding support at 47,914, the lower end of the band. We expect some bounce from here, and traders can consider a buy-on-dips strategy with caution at this level.

Key Resistance: 48,574, 48,900

Key Support: 47,924, 47,840

Strategy: Buy Bank Nifty Futures near the cash price of 48,000 for a target of 48,550, with a strict stop-loss at 47,840.

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

After two months, the Bank Nifty is back to the previous important support level of 47,800. Since the start of February, the Bank Nifty has plunged more than 5%, largely driven by PSU banks. On the daily chart, since February 20, not a single candle has closed above the prior day's high, suggesting that the daily outlook remains negative unless we see a close above the prior day's high.

In the previous session, the Bank Nifty witnessed a minor pullback and closed in the green. However, prices still managed to protect the prior day's high on a closing basis, which keeps the undertone on the side of the bears. In summary, the trend for the Bank Nifty remains bearish. A break below 48,000 could result in fresh selling toward 47,800. A breach below 47,800 could intensify further selling pressure. On the upside, a break above 48,400 could trigger short-covering.

Key Resistance: 48,400

Key Support: 47,600

Strategy: Short positions in Bank Nifty Futures can be created below 48,000, with targets of 47,800, followed by 47,600, and a stop-loss at 48,200.

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