Caught in a bear trap after three straight days of gain, the Nifty lost more than a percent on February 3 on weak global cues and selling across sectors barring auto.
The index started lower at 17,767.75 and as the day progressed, it gradually extended losses to hit the day’s low of 17,511.15. It closed 219.80 points, or 1.24 percent, lower at 17,560.20 and formed a bearish candle on the daily charts as the closing was lower than opening levels.
If the index fails to bounce back in the coming session, then there could be more selling pressure, pushing the Nifty below 17,300, experts said, advising against long-term trades.
India VIX, which measures the expected volatility in the market, was up by 2.73 percent to 19.16 levels, which needs to cool down below the 15-mark for stability in the market.
Also read: Taking Stock | Market snaps 3-day gaining streak; Sensex tanks 770 points, Nifty below 17,600
“The bulls appear to have encountered selling pressure around its resistance points of 20-day SMA (17,750) and 62 percent retracement level of its last leg of fall from the highs of 18,350 to a low of 16,836 levels,” said Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisors at Chartviewindia.
The index also failed to take support at the bullish gap zone of 17,674–17,622, registered on February 2, and closed below the said gap by wiping out the good part of the gains of the previous two sessions.
If the Nifty fails to recover in the next session, there can be a high possibility of a short-term top at a recent high of 17,794, Mohammad said. In that scenario, “near-term targets on the downsides can be 17,244 levels”, it said.
Mohammad said short-term traders should stay away from long side trades, while intraday traders can consider shorting below 17,500 and look for a modest target of 17,400 with a stop-loss above 17,560.
Also read: Gainers & Losers: 5 stocks that moved the most on February 3
On the options front, the maximum Call open interest was seen at 18,000, then 175,00 strike, while maximum Put open interest was seen at 16,500 then 16,000 strike.
Marginal Call writing was seen at 17,700, then 17,600 strike, while Put writing was seen at 17,000 then 16,800 strike.
The options data indicated that the Nifty could trade in a wider range of 17,200 to 18,000 in the coming sessions.
The broader markets also witnessed correction, with the Nifty midcap 100 and smallcap 100 indices falling 0.96 percent and 0.34 percent, respectively.
Bank Nifty
The Bank Nifty opened lower at 39,255.70 and mirrored the broader market. The good part is that it has continued to make higher lows from the last seven sessions.
It crossed its previous day’s high to hit 39,424.85 but failed to hold on it and closed 320.50 points lower at 39,010.
The index formed a bearish candle on the daily scale.
“The index has to hold above 38,850 levels for an up move towards 39,250 and 39,500 levels, whereas support can be seen at 38,500 and 38,250 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, a bullish setup was seen in Hero MotoCorp, Coromandel International, Bajaj Auto, Biocon, Ashok Leyland, GAIL, NMDC, Tata Power, Bandhan Bank, Cholamandalam Investment, Colgate Palmolive, NALCO and ITC.
Weakness was seen in Godrej Consumer Products, M&M Financial, MCX, L&T Technology Services, Mindtree, Mphasis, Jubilant Foodworks, Muthoot Finance, L&T Infotech, HDFC, Coforge, SBI Life, Infosys, Max Financial Services, HPCL and Shriram Transport, he added.
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