Trade Setup For Feb. 5: Traders Should Buy On Dips If Nifty 50 Holds 23,630 Levels

The NSE Nifty 50 has formed a big green candle of daily scale, indicating strength, but it may face resistance at the 24,000 mark, according to analysts.

The index has crossed the barrier of 23,630–23,640 and remained above it, indicating fresh buying interest, according to Hrishikesh Yedve, research analyst at Asit C Mehta Investment Interrmediates Ltd.

Yedve emphasised that if Nifty holds 23,630 levels, then traders should follow a buy-on-dips strategy. "On the upside, 23,750–23,800 will act as an immediate hurdle for the index, where the trend line resistance is placed. Sustaining above 23,800 unlocks the door for 24,000–24,200," he added.

The Nifty has formed a bullish pattern, breaking above the key level of 23,500. This level will now act as support, according to Aditya Gaggar, director of Progressive Share Brokers Pvt. "The momentum looks set to continue, but it may face resistance at the 24,000 mark."

The Bank Nifty has found support near the 21-day simple moving average, which is near 48,990. The index decisively broke through the 50,010 hurdle, indicating a fresh breakout, Yedve said.

"The index could attempt to test the levels of 50,500–50,600 in the short term, where the previous resistance was located. Traders are advised to adopt a buy-on-dips strategy in Bank Nifty," he added.

The NSE Nifty 50 and BSE Sensex had the best session since Jan. 2, as market participants found temporary relief after US President Donald Trump delayed imposing tariff on Canada and Mexico for a month. HDFC Bank Ltd. and Reliance Industries Ltd. share prices contributed the most to gains.

The NSE Nifty 50 ended 378.20 points or 1.62% higher at 23,739.25 and the BSE Sensex closed 1,397.07 points or 1.81% up at 78,583.81.

Foreign portfolio investors turned net buyers of Indian equities after 23 straight sessions on Tuesday as they bought stocks worth approximately Rs 809.2 crore.

Domestic institutional investors were net sellers after 34 consecutive buying sessions as they offloaded equities worth Rs 430.7 crore, according to provisional data from the National Stock Exchange.

The Nifty February futures were up 1.49% to 23,791 at a premium of 51.75 points, with the open interest down by 2.5%.

The open interest distribution for the Nifty 50 Feb. 6 expiry series indicated most activity at 24,000 call strikes, with the 23,000 put strikes having maximum open interest.

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Asian stocks opened higher tracking overnight Wall Street gains as traders await the implications of the renewed US-China trade war. The tariffs on Canada and Mexico were however put on hold.

All eyes will be on the opening of China's stock market after a long break as the country imposed retaliatory tariffs almost immediately after US tariffs came into force. China will also investigate Google for alleged antitrust violations.

Japan's Nikkei was up 126 points, or 0.32% at 38,916 while South Korea's Kospi rose 1.17%, or 20 points to 2,510 as of 6:38 a.m. Future contracts in China hinted at a negative start for the stocks while Hong Kong looks poised for gains.

The dollar index — which tracks the greenback's performance against a basket of 10 leading global currencies — was 0.01% down at 107.94. China Caixin services PMI data will be in focus on Wednesday while India gears up for its interest rate decision later this week.

Volatility is set to stay high as investors brace for an escalation in trade war. Chinese stocks in Hong Kong have displayed resilience, while a gauge of US-listed Chinese companies rose 2.7%, according to Bloomberg.

Meanwhile, buying on dips in the US stocks sent Wall Street higher with the heavyweight leading the gains. The S&P 500 and the tech-heavy Nasdaq Composite rose 0.72% and 1.35%, respectively. The Dow Jones Industrial Average advanced 0.30%.

Alphabet shares fell as it posted fourth-quarter revenue that missed analysts’ expectations after growth in its cloud business slowed.

Crude oil prices steadied a day after its fall on US-China trade war concerns. The Brent crude was up 0.10% at $76.28 a barrel as of 6:50 a.m. IST, and the West Texas Intermediate was up 0.23% at $72.87.

The Indian rupee closed stronger on Tuesday against the US dollar. The local currency strengthened 12 paise to close at Rs 87.08 against the greenback, according to Bloomberg. It had closed at 87.20 on Monday against the dollar.