Technical View | Traders cautious ahead of MPC interest rate decision; 17,800 crucial for upside

The Nifty50 has been rangebound for the fourth straight session. If the index decisively surpasses 17,800 then 18,000 can be the next possible resistance for the Nifty, with crucial support area of 17,600-17,550 levels, say experts

The Nifty50 extended a downtrend for yet another session taking support at 17,700 on February 7, as traders seem to retain a cautious stance ahead of the interest rate decision by Monetary Policy Committee scheduled for February 8.

The index has formed a bearish candle with a long lower shadow on the daily charts, making lower high lower low formation, indicating a bit of weakness in the market while taking support at 17,700 and resistance at 17,800 levels.

Overall, the index has been rangebound for the fourth straight session. If the index decisively surpasses 17,800 then 18,000 can be the next possible resistance for the Nifty, with the crucial support area of 17,600-17,550 levels, experts said.

The Nifty50 opened higher and climbed up to 17,811 but lost all those gains and hit a day’s low of 17,653 in the afternoon. The index tried to recover in the last hour of trade but that also failed and finally settled with 43 points loss at 17,722.

“On intraday charts, the Nifty has consistently found resistance near 17,800 level and has also formed a lower top formation which is indicating temporary weakness,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.

He feels that as long as the index trades below 17,800, the selling pressure is likely to continue, below which, the Nifty could slip to 17,600-17,550.

On the flip side, a fresh uptrend is possible only after the dismissal of 17,800, above which the index could move up to 17,850-17,900, the market expert said.

On Option front, we have seen weekly maximum Call open interest at 18,000 strike followed by 18,500 strike and 17,800 strike, with Call writing at 17,800 strike and then 18,000 strike. On the Put side, the maximum open interest was seen at 17,700 strike followed by 17,000 strike and 17,500 strike, with writing at 17,700 strike and then 17,400 strike.

The above Option data indicated that the Nifty50 could see a trading range of 17,500-18,000 for coming sessions.

Bank Nifty opened positive at 41,513 and moved in line with the broader market with consolidation followed by wild swings. It failed to hold the 41,550 level and drifted towards 41,100. It witnessed a good recovery of more than 500 points from the day’s low in the second half of the session and finally closed the day with gains of 116 points at 41,491.

The banking index has formed a Doji sort of candle on the daily scale and negated its higher lows formation of the last three trading sessions.

“Index has been trading in a wider range between 50 DEMA (41,961) and 200 DEMA (39,868) on a daily scale from past seven trading sessions and now it has to continue to hold above 41,250 level for an up-move towards 41,750 and 42,000 area, with supports at 41,250 and then 41,000 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

India VIX fell by 3.82 percent from 14.69 to 14.13 levels. Volatility has overall fallen down from higher levels in the last six sessions and now needs to hold below the 14 zone for market stability.

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