All Eyes On 22900 For Nifty50

Gift Nifty, is showing a gap down of 10 points at 6:30 AM this morning. The Dow Jones Industrial Average has closed lower by 176 points, while the Nasdaq has closed higher by 81 points. Currently, Dow futures are trading higher by 15 points, and Nasdaq futures are down by 21 points. Taking cues from Gift Nifty, the Nifty50 is expected to open at around 22,930. This closing level of Nifty50 has been the lowest since June 6, 2024. In the weekly charts of Nifty50, this has been the lowest close since the first week of June. The 10-day Daily Exponential Moving Average is placed at 23,210, and the 20-day DEMA is at 23,296, which are about 200 to 250 points away from the potential opening of Nifty50 today.

To gauge market direction, we need to consider support and resistance levels based on call and put writers' convictions. According to the option chain, there is strong conviction among call writers at 23,000, which serves as an immediate resistance for Nifty50. The level to watch will be 22,900, where a total of 198,000 calls and 206,000 puts are competing for resistance and support. Any increase in put Open Interest at the 22,900 level will provide support to the market, while an increase in call OI will extend resistance.

Overall, FIIs remain bearish. The 22,786 level has been tested three times since January 27, raising the question of how long this level can hold. If this level breaks, there is no significant support until 22,500. It is advisable to observe the market for the first 15 minutes to allow it to settle before gauging its direction. The market could potentially reach the 10 and 20 DEMA levels if it moves upward, or test 22,786 again if it moves lower.

FIIs are still short in all market segments. The Implied Volatility remains neutral with no major changes on a closing basis. Any rise in the markets will be viewed as an opportunity to sell, as it remains a sell-on-rise market.

Nifty Bank, after a volatile session, has closed within its trading range. The 10 DEMA at 49,527 and 20 DEMA at 49,552 continue to act as resistance. The 49,500 level holds 1.056 million calls compared with 0.763 million puts. With put unwinding of 101,000 contracts at the 49,500 level, the conviction of put writers is weakening. Any rise towards these levels presents a selling opportunity, with the bottom of the range at 48,700.

Options Chain
Nifty50  (Expiry February 20)
Call writers moved their positions from 23400 to 23300, indicating a shift in market sentiment. The addition of 503000 calls, bringing the total to 745000 calls at the 23300 level, establishes this as an immediate and very strong resistance point. Aggressive call writing was observed at every level from 22900 to 23500. The conviction of call writers is evident from the large number of calls compared to the smaller number of puts.

This data suggests that Nifty50's upward movement is likely to be limited. On the downside, if Nifty50 breaks the crucial level of 22786 and trades below this for 15 to 30 minutes, it could potentially drop to the 22400 level. The Put-Call Ratio has been in an oversold zone for some time and is expected to remain so. The IV, which reflects the market's expectation of future volatility, is 14.43 on the put side and 14.26 on the call side.

Nifty Bank (Expiry February 27)
The situation has not changed significantly from Thursday. Some put unwinding occurred at various levels. Call writing was noticeable at 49000, 49500, and 50000 levels. Despite Friday's market decline, put writers at the 49000 level remain confident, as no major put unwinding was observed. With 1.28 million put options written at 49000, this level should act as support for Nifty Bank. Similarly, with 1.448 million call options written at 50000, this level is likely to serve as resistance. The IV on the put side is 16.08 and 18.22 for call options. Although FIIs hold short positions in Nifty Bank futures, the options data suggests that Nifty bank is unlikely to fall below 49000, with 50000 being the resistance.

Support and Resistance
 - Nifty50: Major support at 22500; major resistance at 23300
 - Nifty Bank: Major is at 49000; major resistance at 50000
 - Sensex: Major support at 75000; major resistance at 76500

Put-call Ratio and at-the-money
 - Nifty50: Overall 0.60; ATM 0.73 (Bearish)
 - Nifty Bank: Overall 0.7; ATM 0.80 (Bearish)
 - Sensex: Overall 0.80; ATM 1.08 (Neutral to Bullish)

Friday
Spot
Nifty50 opened with a gap up of 65 points at 23096 on Friday, and Nifty Bank opened with a gap up of 125 points at 49485.

Profit booking started at the opening trade itself in line with what was mentioned on Friday. Nifty50 broke the  psychologically important barriers of 23000 and 22786. The level of 22786 is considered a strong buying zone, and Nifty50 rebounded from its intraday low of 22774. It was not only able to regain the important level of 22786 but finally closed the day at 22929. Nifty50 has now formed a triple bottom at 22786, a bullish chart pattern; this seems to be the immediate support level for Nifty50. Eleven of Nifty’s 50 stocks closed the day in green.

Nifty Bank also traded in tandem with Nifty50 on Friday. Nifty Bank opened higher, and some profit booking was seen at the opening trades. Nifty Bank attempted to move upwards and made an intraday high of 49592. It faced resistance at the 10-day DEMA of 49527 and 20-day DEMA of 49552. It then fell along with Nifty50 to its intraday low of 48719 to finally close the day at 49099. Only one out of 12 Nifty Bank stocks could close the day in green.

For the other sectorial indices, it was also not a good day. Almost all sectorial indices closed in the red. The notable losers were Nifty Next 50 (-2.28%), Nifty Mid Select (-2.38%), Nifty Midcap 100 (-2.41%), Nifty Auto (-1.23%), Nifty Consumer Durables (-2.31%), Nifty FMCG (-0.33%), Nifty Pharma (-2.87%), Nifty CPSE (-2.37%), Nifty PSE (-2.51%), Nifty Oil and Gas (-1.45%), Nifty Small Cap 1000 (-3.55%), Nifty Realty (-1.74%), and Nifty Metal (+1.79%).