Trading Plan: Will the southward journey continue in Nifty, Bank Nifty?

Nifty Trading Plan

Since hitting 23,800, the Nifty 50 has remained under the control of bears for three consecutive days, falling below the 50-day and 200-day EMAs, with the continuation of a lower highs-lower lows formation. If the Nifty 50 breaks 23,400 (50-week EMA), the index may extend its downtrend toward 23,250 (last week’s low). However, sustaining above 23,400 may drive the index back toward 23,800. If the Bank Nifty breaks 50,000, the selling pressure could drag the index toward 49,600-49,500, the key support zone. Below this, bears may gain control. As long as the index holds above 50,000, a rally toward 50,600-51,000 is possible, experts said.

On Friday, February 7, the Nifty 50 closed at 23,560, down 43 points, and the Bank Nifty declined 223 points to 50,159, with market breadth favouring bears. A total of 1,681 shares declined, against 876 shares that gained on the NSE.

Nifty Outlook and Strategy

Rajesh Bhosale, Technical Analyst at Angel One

Going forward, the bullish gap around 23,400, followed by the handle low at 23,250 (Monday’s low), can serve as crucial support levels. A break below these levels could cause the current up-move to fizzle out, pushing prices back toward 23,000 and lower.

On the flip side, despite multiple positive triggers, prices struggled at higher levels as markets approached the upper boundary of a Falling Wedge pattern, which we have been tracking for the past few weeks. The lower end of this pattern previously acted as support, while the higher end now serves as a stiff hurdle near the 89 DEMA. Resistance levels remain at 100-point intervals, with key hurdles at 23,800 (Tuesday’s high), 23,900 (89 DEMA), 24,000 (200 DSMA), and 24,250 (previous swing high). A strong buying momentum is needed to surpass these levels; until then, traders should book profits at regular intervals. The market may continue consolidating in the near term within the 23,250–23,800 range, and a breakout from this zone could reignite momentum.

Key Resistance: 23,800, 24,000

Key Support: 23,400, 23,250

Strategy: The benchmark index is consolidating, with sentiments gradually improving but facing strong overhead resistance. Traders should consider buying on dips and booking profits at higher levels.

Rajesh Palviya, Senior Vice President Research (Head Technical Derivatives) at Axis Securities

Nifty gained 78 points for the last week. On the weekly chart, the index formed a bullish candle with an upper shadow, indicating profit booking at the downward-sloping trendline from the all-time high of 26,277, established in the last week of September 2024.

The index faces resistance at 23,800-24,000, where a trendline converges with the 200 SMA (24,039). A breakout above this level could lead to further gains, while the 20 SMA (23,294) serves as key support. Should the index fall below the 20 SMA, it may experience downward movement. Looking ahead, a sustained move above 23,800 could trigger buying activity, propelling Nifty toward 24,000-24,200. Conversely, if the index breaks down below 23,450, it may invite selling pressure, potentially pushing it lower to 23,300-23,000.

For the week ahead, Nifty is expected to trade within a broad range of 24,200-23,000, reflecting a mixed bias. The weekly Relative Strength Index (RSI) has flattened, indicating a lack of momentum and a clear direction.

Key Resistance: 23,650, 23,800

Key Support: 23,300, 23,100

Strategy: Buy Nifty Futures around 23,300 with a stop-loss of 23,150, targeting 23,650-23,800.

Ameya Ranadive, CMT, CFTe, Senior Technical Analyst at StoxBox

The Nifty has managed to hold support at its 20-day EMA, reinforcing near-term stability. However, at higher levels, it faces significant resistance from the 50-day and 200-day EMAs, which could limit upside movement unless convincingly breached.

The February series has witnessed aggressive short positions by FIIs, with 84% of their positions on the short side. Notably, this has occurred with minimal price change, indicating the potential for short covering if sentiment shifts. Historically, similar low long-short ratios (10-15%) over the past three years have been followed by strong market upmoves, reinforcing expectations of a rally if unwinding occurs.

Options data suggests a moderately bearish bias, with Call writers holding an upper hand. The 24,000 strike Call has seen a sharp increase in open interest, marking it as a key resistance level. Meanwhile, heavy Put writing at the 23,000 strike indicates strong downside support. If Nifty surpasses 23,800, we could see significant short-covering, potentially driving the index towards 24,000. However, failure to breach this zone may result in continued consolidation.

Key Resistance: 23,800, 24,000

Key Support: 23,350, 23,500

Strategy: Traders should consider buying Nifty on dips toward 23,450, with upside targets of 23,625-23,785. The bullish outlook remains valid as long as Nifty holds above 23,300; a breach below this level would negate the positive view.

Bank Nifty - Outlook and Positioning

Rajesh Bhosale, Technical Analyst at Angel One

The winning streak has extended into a second week, reflecting positive momentum. However, the proximity to the cluster of EMAs and the 200 SMA on the daily chart suggests that we may encounter some challenges in the near future. Furthermore, with the index positioned at the neckline of the breakdown on the weekly structure, it may be wise to approach the next steps with a measured and cautious outlook. In terms of levels, the 20 DEMA near 49,600 is positioned to provide strong support against any potential downturns, complemented by the crucial support from the bullish gap around 49,480-49,370 for the upcoming week. Conversely, the 200 DMSA around 50,900-51,000 is anticipated to serve as a key resistance point in the short term. A decisive breakthrough above this level could pave the way for fresh bullish positions moving forward.

Key Resistance: 50,900, 51,000

Key Support: 49,500, 49,300

Strategy: The banking sector is showing signs of improvement but is nearing a key resistance level. Traders should remain cautious at higher levels, ideally buying on dips and booking profits on the rise.

Rajesh Palviya, Senior Vice President Research (Head Technical Derivatives) at Axis Securities

Bank Nifty gained 652 points for the week. On the weekly chart, the index formed a bullish candle that exhibited a higher high and a higher low, closing above the previous week's high, indicating a positive bias.

Bank Nifty outperformed Nifty, driven by strong momentum following the RBI Monetary Policy Committee meeting on Friday. The chart pattern suggests that a sustained move above 50,500 could trigger buying pressure, potentially pushing the index toward 50,650-51,000. Conversely, a breakdown below 50,000 may result in selling pressure, dragging the index down toward 49,700-49,000.

For the upcoming week, Bank Nifty is anticipated to trade within a broad range of 51,000-49,000, maintaining a positive bias. Additionally, the weekly RSI and the Stochastic momentum oscillator have turned positive and are now positioned above their respective reference lines, reinforcing the optimistic outlook.

Key Resistance: 50,200, 50,500

Key Support: 49,850, 49,650

Strategy: Buy Bank Nifty Futures near 49,900, with a stop-loss of 49,750, targeting 50,400-50,500.

Ameya Ranadive, CMT, CFTe, Senior Technical Analyst at StoxBox

On the daily chart, Bank Nifty is witnessing a squeeze around its 50-day and 100-day EMAs, indicating a period of price compression. A breakout from this congestion zone will be crucial in determining the next directional move. The RSI remains above 50, reflecting a mild bullish inclination, though the overall structure remains lacklustre.

Options data signals a cautious undertone, with Call writers maintaining a slight edge. The 52,000 Call strike saw a significant surge in open interest, reinforcing it as a strong resistance level. Meanwhile, notable Put writing at the 49,000 strike underscores a firm support zone. Additionally, Call buildup from 50,500 to 51,000 further strengthens overhead resistance, limiting upside momentum. The Put-Call Ratio (PCR) remains unchanged at 0.85, indicating a bearish undertone.

With Bank Nifty stuck in a congestion zone, a rangebound trading strategy is expected to persist. A decisive breakout on either side will dictate the index’s next trajectory.

Key Resistance: 50,500, 50,750

Key Support: 50,000, 49,700

Strategy: For now, the Bank Nifty remains in a no-trade zone. Traders should wait for a clear breakout beyond the defined range before initiating directional positions. Until then, short-term rangebound moves are likely to dominate.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.