Nifty, Bank Nifty turn green after gapdown open; rollover data suggests negative sentiment lingers

The NSE Nifty 50 and the Bank Nifty trade positive following a negative open on January 24. Following an eventful weekend, the Nifty had commenced the week with considerable enthusiasm on January 23, opening around the high of the Saturday session. However, as the day unfolded, a lack of sustained buying led to a correction in the benchmark index. Not only did it erase the morning gains, it also experienced a significant sell-off throughout the day, eventually closing with a substantial loss of 1.52 percent, just above the 21,200 mark.

Negative sentiment to last

The negative sentiment continued in the January 24 session, with data from JM Financial showing that Nifty rollovers were at 46 percent with a 0.8 roll cost, compared to 52 percent in the last series, indicating unwinding of long positions. Bank Nifty rollovers were 42 percent with a 0.9 roll cost, compared to 51 percent in the last series, indicating long unwinding. “On the weaker rollovers front, Nifty broke below 21,300 on a closing basis, and the next support is at 21,000/20,950, below which it may test 20,500,” JM Financial said.

‘Bears in Control’: Watch these Nifty levels for key support

“Currently, bears are firmly in control, as any minor bounce-back is met with selling pressure. The recovery observed in the latter part of the last week has been entirely nullified by today’s sell-off. This has resulted in the formation of a ‘Lower Top Lower Bottom’ pattern on the daily chart, indicating a bearish reversal. When viewed on a larger scale, a ‘Head and Shoulders’ formation, further confirming a bearish trend, is evident. This scenario does not bode well for the bulls and suggests potential challenges in the near term,” Rajesh Bhosale, technical analyst at Angel One, said.

He highlighted that the critical support for the Nifty before the monthly expiry is anticipated around the psychological 21,000 level, coinciding with the key 50SMA average. “Conversely, considering the pattern target, the Nifty may decline towards 20,800 to 20,600 in the near term. On the flip side, any minor recovery is likely to face resistance around the 21,400-21,550 levels. Traders are advised to monitor these levels and exercise caution against initiating long positions in an attempt to time the market bottom ahead of the pivotal Budget session,” he said.

“While the mid-cap index achieved a fresh high in the morning, a widespread sell-off occurred in the latter part of the day, resulting in the formation of a significant bearish candle on the daily chart, nearly breaching the recent consolidation zone,” Bhosale added.

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Angel One anticipates a substantial correction in this space as well. “Therefore, traders should consider booking profits in the mid-cap segment as well,” it said.

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