Analysis of the Nifty50 for the week starting from 06 February 2023

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In our last week’s research, we had predicted that one can initiate a sell trade in the ‘NIFTY 50’ at 17900-18000 levels. If you see the daily chart of the index, you’ll realize that it has fallen from the 17972 to make a bearish move of 619 points. I had taken a small bearish trade through a bear call spread that I closed in profit.

Let’s see what the charts are suggesting for the coming week.

NIFTY 50 Technical Analysis

The weekly chart is showing that the bullish cross (09EMA above 21EMA) is intact and last week’s closing has happened below both EMAs (9 and 21) yet above the 50 weeks’ exponential moving average which has acted as a good support last week. It means the weekly Nifty chart is not giving any clear bullish or bearish signal.  

Let’s have a look at the daily chart, it exhibits the formation of the double bottom pattern (see the video above) right at the 200 days’ exponential moving average. These are two bullish signals one is the formation of the ‘W’ pattern (double bottom) and the other is the retest of the 200DEMA. If we look at the placements of other moving averages, the bearish cross (09EMA below 21 EMA) is intact and prices closed below the 50 DEMA and 21 DEMA which might act as a resistance for the bullish move.

Upon looking at the hourly Nifty 50 chart, we witness the formation of a bullish cross (09EMA above 21EMA). If you see carefully, you’ll see that the double bottom formation is visible here also albeit it is not looking exactly as ‘W’. Anyways, the price has closed above the 50EMA also. So, the hourly chart is giving a bullish signal only.

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All in all, the placement of the moving averages on the different timeframes and the formation of the double bottom pattern suggests for a bullishness albeit there is a resistance at 18000-18100 levels which is strong enough to push the prices down. Though a bullish trade can be taken here but the stop loss will be too far at 17353.40, therefore it is not advisable to take a bullish trade here. Yes, if someone wants to buy the index for long term, this is a good level to accumulate a Nifty-ETF (e.g., SETFNIF50). Okay, here there is a possibility of taking a bearish trade also; if nifty makes a bearish daily candle anywhere near 18000 levels, take a bearish trade with a SL above the high of that day.

NIFTY 50 Options’ Open Interest and FII-DII Data

The Options’ open interest data chart displays that there has been good PUT writing at all the levels on Friday, 03 February 2023 with negligible call writing at all the levels. On the other hand, if we look at the outstanding open interest data, we see that there is a huge CALL writing at the 18000 and exceptional PUT writing at 17700. Therefore, the 18000 is the resistance zone which might not let the Nifty go much above from here and 17700 is the support zone to keep the prices above the 200DEMA. If any of these levels get broken, we might witness a good move towards the breakout direction.

The institutional figures are showing that the FIIs have sold worth ₹14445.05 crores last week while the domestic institutional investors have bought worth ₹14184.51 crores. It means the FII-DII data isn’t giving any clear signal for next week’s trade set up.

Conclusion

All the elements of our above-mentioned analysis are communicating bullishness along with a strong resistance at 18000-18100 zone, therefore I am not in favour of taking any trade this week. However, if anyone still wants to take a trade, he/she can buy the index-ETF at current levels for long term. Yes. If Nifty holds above 18000 for a day or so, then a bullish trade can be taken with a stop loss below the previous day’s low.

Disclaimer: 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.