Nifty Trade Setup for Feb 10: Nifty 50 forms a bearish candlestick pattern

The Nifty 50 continued to face selling pressure for the third straight session on February 7, slipping 43 points amid volatility. This came after the Reserve Bank of India (RBI) announced a 25 basis points rate cut, which was widely expected. The index’s short-term trend appears weak as it dropped below the 200-day Exponential Moving Average (EMA) at 23,620 and maintained a lower tops-lower bottoms formation. If Nifty fails to hold the crucial 23,500-23,400 support zone, further downside pressure may emerge. However, staying above this level could push it toward 23,800, a key resistance level in the coming sessions.

Key Market Levels

Nifty 50 (23,560)

Resistance Levels: 23,662, 23,721, 23,817

Support Levels: 23,470, 23,411, 23,315

Technical Outlook: The Nifty 50 formed a bearish candlestick pattern on the daily chart, falling below the 50-day and 200-day EMAs. Despite this, it remains above the 10-day and 20-day EMAs and the midline of the Bollinger bands, which serve as crucial support levels. The weekly chart showed a slight gain of 0.33%, forming a bullish candle with a higher high-higher low pattern, although higher-level selling pressure persisted.

Bank Nifty (50,159)

Resistance Levels: 50,518, 50,700, 50,995

Support Levels: 49,930, 49,748, 49,453

Fibonacci Resistance: 50,381, 51,162

Fibonacci Support: 47,875, 46,078

Technical Outlook: Bank Nifty initially defended its 50-day and 200-day EMAs but failed to sustain them, forming a bearish candlestick with a long upper wick. Despite this, the trend remains positive as it continues to hold above the 10-day and 20-day EMAs and the Bollinger midline. The index lost 0.44% on Friday but gained 1.32% for the week, maintaining a higher high-higher low formation on the weekly chart.

Options Data Analysis

Nifty Call Options

Highest Open Interest: 24,000 strike (84.13 lakh contracts), acting as key resistance.

Significant Call Writing: 24,000 strike (36.16 lakh contracts added), followed by 23,800 and 24,500 strikes.

Nifty Put Options

Highest Open Interest: 22,600 strike (45.66 lakh contracts), acting as key support.

Significant Put Writing: 23,200 strike (25.77 lakh contracts added), followed by 22,800 and 22,700 strikes.

Bank Nifty Call Options

Highest Open Interest: 52,000 strike (18.66 lakh contracts), a key resistance level.

Significant Call Writing: 51,000 strike (2.36 lakh contracts added), followed by 50,500 and 50,200 strikes.

Bank Nifty Put Options

Highest Open Interest: 49,000 strike (14 lakh contracts), serving as key support.

Significant Put Writing: 51,300 strike (96,960 contracts added), followed by 50,500 and 49,900 strikes.

Market Sentiment Indicators

Put-Call Ratio (PCR): Dropped to 0.83 from 0.95, signaling increased bearish sentiment.

India VIX (Volatility Index): Declined 3.46% to 13.69, remaining in a lower zone, which is favorable for bulls.

Stock-Specific Trends

Long Build-Up: Seen in 52 stocks (increase in both price and open interest).

Long Unwinding: Observed in 45 stocks (decline in price and open interest).

Short Build-Up: Noted in 70 stocks (increase in open interest with a fall in price).

Short Covering: Seen in 63 stocks (decrease in open interest with a rise in price).

High Delivery Stocks & F&O Ban

High Delivery Trades: Stocks with significant delivery-based transactions indicate strong investor interest.

F&O Ban: Manappuram Finance added to the ban list; no stocks removed.

The market remains at a critical juncture, with Nifty 50’s 23,500-23,400 zone being a decisive level for future trends. A breakdown could trigger more selling, while holding above it may pave the way for a recovery toward 23,800. Traders should monitor key resistance and support levels closely and stay updated on global market cues, earnings reports, and macroeconomic developments to make informed decisions.

Disclaimer: The above insights are based on market analysis and do not constitute financial advice. Investors should consult certified professionals before making trading decisions.