It Is A Sell On Rise Situation In The Markets

Todays market setup
Gift Nifty is showing a gap up of 100 points at 6:30 AM. A gap up indicates a potentially strong market opening. Dow  has closed up 342 points and Nasdaq by 295 points, reflecting positive sentiment in the US markets. Currently, Dow OW futures are trading higher by 16 points, while Nasdaq futures are down by 18 points, suggesting mixed signals for the upcoming US trading session.

Taking cues from Gift Nifty, Nifty50 is expected to open at around 23,125. The 10-day Daily Exponential Moving Average  is placed at 23,273, and the 20 DEMA at 23,334. These levels are about 150 to 200 points away from the potential opening of Nifty50 today, indicating some room for a rise.

Asian markets present a mixed picture today, with Nikkei and Hang Seng trading in the red, while Kospi is trading in green. This divergence suggests caution in regional market sentiment.

We will  need to consider support and resistance levels based on the conviction of call and put writers. The option chain indicates strong conviction from put writers at 23,000 and strong conviction from call writers at 23,100. These levels may act as key support and resistance, respectively.

As Nifty50 closed in the lower end of yesterday's trading session, expect some profit booking in the opening trades. This could lead to initial selling pressure.

We should keep a close watch on the Open Interest at the 23,100 level. An increase in put OI at 23,100 will provide support to the market, while an increase in call OI will extend resistance. OI changes reflect shifting market sentiment and positioning.

The market should be watched for the first 15 minutes to let it settle and then gauge its direction. If the market breaks up, it could reach the 10 and 20 DEMA levels. If it breaks down, 22,786 is possible again, a level visited twice in recent days. If this level breaks, 22,500 becomes a potential target.

Foreign Institutional Investors are still short across all market segments, indicating cautious sentiment. The Implied Volatility remains neutral with no major changes on a closing basis, suggesting steady market expectations.

Any rise in the markets should be seen as an opportunity to sell. The market still appears to favour a "sell on rise" strategy.

Nifty Bank, after a volatile session, has remained within its recent range. The 10 DEMA at 49,622 and 20 DEMA at 49,600 still act as resistance. Any rise towards these levels presents a selling opportunity, a "sell on rise" approach.

FIIs have increased their long positions in Nifty50 and Nifty Bank futures, indicating some positive sentiment. They have also added long positions in both call and put index options, suggesting a hedged approach. Additionally, FIIs have increased long positions in stock futures. Overall, FIIs appear to be neutral to bearish on indices, maintaining a cautious stance.

Proprietary trading desks have added a small quantity of long positions in index futures, showing limited bullish sentiment. However, they have increased short positions in stock futures, indicating bearishness in individual stocks. In the options market, proprietary desks are demonstrating bearish behaviour. Their overall stance can be described as neutral to bearish.

Retail clients, often referred to simply as "clients," are showing bullish tendencies in index futures, stock options, and index options. This suggests optimism among individual investors across various market segments.

Domestic Institutional Investors are exhibiting bearish behaviour in stock options, potentially expecting downward movement in individual stocks. They remain neutral in index futures and options, indicating a balanced approach to broader market movements.

The overall market setup appears neutral with a bearish undertone. This means that while there's no strong directional bias, there's a slight inclination towards potential downside risk. Traders and investors will be approaching the market with caution, considering the mixed signals from different market participants.

Yesterday
Spot 
Nifty50  opened with a gap up of 2 points at 23,055, while Nifty Bank opened with a gap down of 168 points at 49,469.

Wednesday's momentum in Nifty50 was seen. After a small decline in the opening trades, which took Nifty50 to its intraday low of 22,992, Nifty50 steadily made an upward march and reached an intraday high of 23,235. As mentioned yesterday,the 23,200 level is also the zone of call writers. Nifty50 faced resistance at this level, where selling pressure was seen.

The conviction of the call writers was so strong that Nifty50 couldn't even reach the 10-day DEMA and 20-day DEMA, placed at 23,273 and 23,334 respectively. The bears dominated the session from there onwards, giving no chance for the bulls to make a comeback. Nifty50 kept declining and lost 200 points to close the day at 23,031, near the day's lowest levels. Overall, it wasn't a good closing for Nifty50 to end at the day's low. Only 22 out of Nifty 50 stocks closed the day in green.

Nifty Bank also traded in tandem with Nifty50. It broke yesterday's high to reach its intraday high of 49,836. Nifty Bank crossed above its 10-day DEMA and 20-day DEMA, at 49,622 and 49,600 respectively, and remained above these two important levels for most of the day. However, profit booking late in the day brought Nifty Bank down. It broke its opening levels to trade lower, reaching its intraday low of 49,276, and finally closed the day at 49,359. Only 4 out of 12 Nifty Bank stocks managed to close the day in green.

For the other sectoral indices, it was a mixed bag. Notable gainers were Nifty Next 50 (+0.20%), Nifty Midcap 100 (+0.25%), Nifty Metal (+0.82%), Nifty Realty (+0.81%), Nifty CPSE (+0.26%), and Nifty PSE (+0.54%). Notable losers were Nifty Pharma (-1.35%), Nifty Mid Select (-0.31%), Nifty Auto (-0.28%), Nifty Consumer Durables (-0.53%), Nifty FMCG (-0.79%), Nifty Oil and Gas (-0.39%), Nifty Small Cap 100 (-0.37%), and Nifty IT (-1.00%).

Options Chain
Nifty50 (Expiry February 20)
Thursday marked the expiry of Nifty50 weekly contracts. The new option chain expiring on February 20, 2025, has not yet fully formed. Based on the current data in the weekly contract, the 23,000 level seems crucial for Nifty50. The bar chart clearly shows little difference between call and put writers at this level. 

For today, this 23,000 level will be pivotal. Any fresh put writing will provide strong support to Nifty50 and potentially push it upwards. Conversely, any fresh call writing will act as resistance and could push Nifty50 downwards. Put writing suggests bullish sentiment, while call writing suggests bearish sentiment.

As mentioned yesterday, 22,785 is a crucial level for Nifty50. If it slips below 23,000 and gives a convincing 15-minute close below this level, there isn't much support until 22,800. The 22,786 level is also the zone of 22,900 put writers.

The IV on the put side is 14.77, while on the call side, it's 14.00.

Nifty Bank: (Expiry February 27)
Not much has changed since Wednesday. There has been some call unwinding today at every level. 

With 1.36 million contracts of put writing at 49,000, this level will serve as support for Bank Nifty; with 1.670 million contracts of call writing at 51,000, this level will act as resistance for Bank Nifty.  The IVon the put side is 16.99, while on the call side, it's 17.26. The volatility will be higher than for Nifty50.

These levels and option activities provide key insights into potential price movements and market sentiment for Nifty Bank in the coming days.

Support and Resistance
 - Nifty50: Major support is at 22500; major resistance at 23500.
 - Bank Nifty: Major support is at 49000; major resistance at 50000.
 - Sensex: Major support is at 76000; major resistance at 76500. 

Put-call ratio and At-the-Money
 - Nifty: Overall 0.70 and at ATM 0.72 (Bearish)
 - Bank Nifty: Overall 0.7 and at ATM 1.08 (Neutral to Bullish)
 - Sensex: Overall 0.90 and at ATM 1.05 (Neutral to Bullish)