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Trade Setup for Jan 25: Monthly F&O expiry in focus as Nifty 50 continues to struggle for direction

Trade Setup for Jan 25: Monthly F&O expiry in focus as Nifty 50 continues to struggle for direction

Trade Setup for Jan 25: Monthly F&O expiry in focus as Nifty 50 continues to struggle for direction
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By Hormaz Fatakia  Jan 25, 2023 6:25:28 AM IST (Published)

Tuesday was the third straight day of the Nifty 50 making higher highs and higher lows on the charts.

There are four more trading sessions to go including today's before Finance Minister Nirmala Sitharaman presents the Union Budget on February 1. A truncated week due to the Republic Day holiday would also mean that today's session will mark the January series F&O expiry.

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Throughout the January series, the Nifty 50 has consolidated in a 500-point range. The index made an intraday high of 18,265 on the first day of the series and has failed to cross that mark since then. On the downside, it broke below its December 26 low of 17,774, but rebounded without further damage.
Tuesday's session was equally listless with the market cooling off from the day's high to end at nearly the same level as it did on Monday. The Nifty made a high of 18,200 but failed to sustain those levels. If it counts as any solace for a market struggling for direction, Tuesday was the third straight day of the Nifty 50 making higher highs and higher lows on the charts.
Broader markets were the underperformers on Tuesday compared to the benchmark indices.
Jai Bala of cashthechaos.com believes this recent upmove is a corrective rally as the market has turned lower. He sees resistance for the Nifty 50 index at levels of 18,350 and can even stretch to 18,400. "But once 17,850 gets broken on the downside, the markets are heading much lower," he said. He also advised investors to reduce their positions in IT names as the overall view on the market is negative.
What do the charts suggest for Dalal Street?
Ruchit Jain of 5paisa.com does not see significant downside from current levels but wants to know when will the index will give a breakout beyond the recent consolidation phase. "With few day’s left for the Union Budget, we anticipate a directional move soon and looking at the data, traders should look for buying opportunities in this consolidation phase and buy stocks from a positional perspective," he said.
A long bear candle was formed on Nifty 50's daily chart, according to Nagaraj Shetti of HDFC Securities. He expects the short-term trend on the index to remain rangebound and choppy moves to continue for the next 1-2 sessions. Minor pullback rallies in between have been sold off.
Here are key things to know about the market ahead of the January 25 trading session:
SGX Nifty
On Wednesday, Singapore Exchange (SGX) Nifty futures — an early indicator of the Nifty 50 index — was unchanged at 18,130, thereby pointing to a subdued opening for the market.
Global Markets
Markets in Asia are trading mixed, most of which have opened after a Lunar New Year holiday. The Nikkei 225 was down 0.2 percent while the Topix also traded with a negative bias. The Kospi and Kosdaq in South Korea gained 1.2 percent each. China and Hong Kong's markets continue to remain shut.
It was a quiet session for the markets on Wall Street as well overnight. The Dow Jones gained for the third day in a row after adding 100 points, while the S&P 500 and the Nasdaq ended marginally lower.
What to expect on Dalal Street
Chandan Taparia of Motilal Oswal believes that the Nifty 50's Relative Strength Index (RSI) giving positive divergence against the price is indicative of market resilience near major support zone. He believes that the consolidation phase may end soon and a hold of 18,181 - 18,250 levels can trigger a fresh upmove towards 18,442 and then towards 18,881, provided the budget lends support to the market sentiment.
Taparia also expects the market to follow a buy on decline template until the Volatility Index does not cross levels of 16-17.
The Nifty Bank once again failed to surpass the crucial hurdle of 43,000 where there is maximum open interest build up on the call side, according to Kunal Shah of LKP Securities. He sees immediate downside support for the index at 42,500, which in case of a breach, will result in additional selling pressure.
Key levels to watch out for
For today's weekly and monthly options expiry, the 18,250 call of the Nifty 50 index added 36.3 lakh shares in Open Interest, while the 18,200 and 18,150 call added 31 lakh and 30.6 lakh shares respectively.
On the downside, shedding was seen in the 17,600 put (24.2 lakh shares) and 17,700 put (17.2 lakh shares). The 17,900 put added 16.2 lakh shares in Open Interest.
Nifty 50's put-call ratio now stands at 0.81, down from 0.94 on Monday.
L&T Finance Holdings, Delta Corp and PVR are all out of the F&O ban.
FII/DII activity
Short Covering (Increase in price and Decrease in Open Interest)
StocksCurrent OICMPPrice ChangeOI Change
Godrej Consumer Products6,16,000989.000.23%-71.99%
Can Fin Homes8,37,525563.052.09%-63.35%
Balkrishna Industries1,94,7002,252.500.14%-62.09%
Long Unwinding (Decrease in price and Open Interest)
StocksCurrent OICMPPrice ChangeOI Change
Dalmia Bharat4,24,5001,749.10-1.12%-53.09%
Zee Entertainment1,94,85,000222.65-0.58%-52.71%
Adani Ports87,10,625759.50-1.41%-52.24%
Tata Consumer Products20,59,200740.70-0.44%-51.34%
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