Nifty Analysis for the week starting from 23 January 2023

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The ‘Nifty 50’ traded in the range of 17850-18185 in the trading week closed yesterday. This move was in line with our analysis for this week that suggested us not to take any trade. We had also propounded to initiate a bearish trade near 18090-18150 levels with a stop loss above 18200. This bearish trade must be in a minimum profit of 63 points as of now, because index closed at 18027 on Friday, 20 January 2023 after making an intraday high of 18145. Along with this, we had also advocated to buy the index if it breaks above 18200 with good volumes which didn’t happen. So, our study has gone correct this week also, as it has been going for previous five weeks.

Let’s now delve into the Nifty technical analysis to create a trading-view for coming week.

NIFTY 50 Technical Analysis

There has been Doji candle formation on the weekly chart but price is still between both the components (09EMA and 21EMA) of the bearish-cross set-up. Index has also formed a falling-wedge-pattern which is a bullish signal but price could not break well above the upper trend line of this pattern. Therefore, we cannot go for any bullish trade unless this break-out happens in coming weeks. So, the weekly chart is showing a neutral behavior of the market participants.

Looking at the daily chart, we find that the index had given a breakout above the upper-trendline of the falling-wedge-pattern on 17 January 2023 along with a follow-up move on 18 January 2023 albeit no further up moves are visible on the Nifty chart. It means either price is going down to retest the falling-wedge-pattern or it is going to respect the bearish-cross (09 EMA below 21 EMA) setup. The latter seems more likely to happen because the price closed below both exponential moving averages on Friday, 20 January 2023 and bearish-view is supported by the bearish candlestick pattern formation. If you see the candlestick chart, you’ll find that a Doji-like inside-bar candle has been formed on 19 January 2023 confirming bearishness with the formation of another red candle on 20 January 2023 which closed below the low of 18 January 2023. Therefore, our inclination should be towards taking a bearish trade.

Let’s have a look at the hourly Nifty 50 chart, it shows that there has been a bearish cross (09 EMA below 21 EMA) formation. The price has closed below the 50 EMA also. So, the hourly chart gives a pure bearish signal for a target of 17930 which is the retest zone of falling-wedge-pattern.

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After studying the index chart in three different and important timeframes, we witness that weekly chart is neither giving bullish nor bearish signal while the daily and hourly charts are giving bearish signals. Therefore, I have taken a bearish spread by selling a call of 18000 strike-price and buying the call of 18100, that offers a possibility of maximum gain of 51.05 points along with the risk probability of 48.95 points. The strict stop loss above 18183.75 has been placed, which was the high of the week passed, in order to safeguard my capital if this prediction, based on our reading of Nifty technical chart, goes wrong.

NIFTY 50 Options’ Open Interest and FII, DII Data

When we look at the options’ open interest chart, we witness that there has been good addition of calls at the strike-price of 18100 whilst none of the strike-prices have seen such put addition, on Friday 20 January 2023. Looking at the outstanding open interest data, it also shows highest option writing at the call of 18100-strike-price followed by slightly lower open interest at the call of 18200. Therefore, 18100-18200 becomes a resistance zone to initiate bearish trades.

The institutional figures show that the FIIs have sold worth 2461.03 crores last week against the net buying of 3383.72 by DIIs. It means there has been net institutional buying of 922.63 crores which is slightly bullish signal. So, all the bearish trades must be taken with relatively stricter stop losses.

Conclusion

We can see, in our above-mentioned Nifty analysis, that technical study is giving bearish signal supported by the options’ data albeit the institutional figures are giving sideways to bullish signal. Therefore, I have entered a bearish trade near 18020-18090 levels with a strict sop loss at 18200, for the first target of 17930 and second target of 17800.

Note: I have just shared what I studied. I am not sure if I’ll trade next week or not. Also, the Data, used for analysis, has been taken from different sources on internet and I am not a SEBI authorized analyst, therefore verify the data and seek experts’ opinion before taking any trade.