Nifty 50 study for the first week of March 2023

Last week, we predicted that Nifty should either be bought above 18034 or sold below 17884.60. It didn’t go above 18034 but fell below 17884.60 and gave a good move. If you would have sold it at 17883, you’d have made a profit of at least 418 points, as index closed at 17465 this week.

Let’s look in to the technical charts of the index to make a strategy for the forthcoming week. 

NIFTY 50 Technical Analysis

The weekly chart exhibits that 09 EMA and 21 EMA have been dissected by a red candle and index is at the verge of forming a bearish cross. It is also visible that price closed right at 50 week’s exponential moving average. If ‘Nifty 50’ closes below the 50WEMA next week, bearish cross formation will be completed and it will be an indication for further bearishness.  

Positioning of 09EMA, 21EMA, 50EMA, and 200 EMA on Nifty Weekly Chart

Looking at the daily chart, we can see that bearish cross (09 DEMA below 21 DEMA) had been formed on 21 February 2023 and index is currently trading at 17465 which is nearly 275 points away from the moving averages of the crossover. Therefore, it may go up a bit to retest the EMAs of bearish cross along with 50 DEMA. However, it is also evident that index is trading below 200 day’s exponential moving average and above 200 day’s simple moving average. Although, the Nifty 50 chart is communicating the market weakness but I still think that the index might show an up move or sideways move to retest the bearish cross (09 DEMA below 21 DEMA) setup which’d be supported by the 200 day’s simple moving average. So, if market falls after testing the 17700-17780 levels, a bearish entry should be taken for the first target of 17372 and second target of 16747.

Positioning of important EMAs (09,21,50, and 200), 200 SMA, and RSI, on Nifty Daily Chart

On the hourly chart also, bearish cross (09 EMA below 21 EMA) is intact but price is about 100 points away from 21 EMA and 225 points away from 50 EMA which opens a possibility of an up move of 100 to 225 points before any further fall.

Nifty Hourly Chart with the positioning of 09EMA, 21EMA, and 50EMA, and RSI reading

Based on the above mentioned Nifty technical analysis, I am in favour of taking a bearish trade on the formation of a red candle at 17700-17800 zone, with a stop loss above that day’s high, for a target of 17374. 

NIFTY 50 Options’ Open Interest and FII-DII Data

The institutional data shows that FIIs have sold ₹3100.55 crores while DIIs have bought ₹3209.60 crores, which means there has been a net buying of ₹109.05 crore. It is a neutral signal.

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If we see the options’ OI addition data chart, it is evident that there has been highest and huge CALL addition at the strike of 17600 on Friday, 24 February 2023, along with good CALL OI addition at all the strikes above 17600. On the other hand, there has been quite lesser PUT OI addition at all the strikes on Friday.

Options' Open Interest Data Chart

Looking at outstanding open Interest data chart, we can see that there is highest CALL open interest at 17600 along with slightly lower call writing at 17500 and 17700, which together are making this zone a strong resistance. On the other hand, the strikes of 17400, 17300, and 17200 are holding comparatively lower PUTs’ open interest.

Conclusion

Based on our aforementioned Nifty Analysis, I am interested in taking a bearish trade near 17750 if there happens to be a formation of good red candle. My stop loss would be above the high of that candle and target would be at 17374. Please be advised that Index might continue its current fall without the retest of the level mentioned, and I am happy to miss the trade in that case.