Banknifty’s Gap-Up, a Quick Trade 20th Jan Trades

Markets often surprise us with gap-ups or gap-downs that change our morning plans in an instant. Today was no different.

Nifty

Nifty also began the session +87.20 points higher at 23,290.40.

With such significant moves right at the opening bell, a considerable portion of the potential intraday gains can already be priced in. That means it’s essential to wait patiently for the next solid setup—if it appears at all.

Below is a detailed breakdown of my day, the single trade I took, and my thoughts on how the indices might play out tomorrow.

The first thing I noticed was the strong performance from certain key stocks. Kotak Mahindra Bank jumped by about 7%, and WIPRO showed a 6% gain. These jumps were mainly due to the broader gap-up in both indices. When a stock leaps so high at the open, there’s often a possibility of profit booking (or mild selling) the following day. It’s something to keep an eye on, especially if the market momentum shifts.

I also marked specific areas on my charts where I’d feel comfortable initiating trades. However, the gap-up start forced me to wait. Nifty filled the gap it created, moving downward in the morning, while Banknifty kept climbing. Once again, the two indices were out of sync, which can make it difficult to find a clear trade that aligns with both.

By around 11:15 AM, Banknifty finally dipped into the zone I had been waiting for. At that point, I decided to sell 48,500 PE at ₹354.70, aiming for a move up toward 49,300 in the spot market. Thankfully, the trade worked out quickly; within a single 15-minute candle, the price reached my exit area, and I closed the position at ₹296.40. That quick move was enough to secure a decent profit, so I exited without hesitation.

It was encouraging to see that Nifty also tried to move higher around the same time, breaking above its day high. However, the breakout on Nifty was accompanied by small green candles, indicating a lack of strong follow-through. The price essentially entered a period of consolidation right after the breakout. If you look at the daily chart for Banknifty, there’s a noticeable gap near 49,300, and that’s precisely where I decided to wrap up my trade. No point in overstaying when you’ve already achieved your planned target in a short span.

In the second half, Banknifty climbed all the way up to around 49,500, spiked slightly to 49,650, and then reversed downward, finishing around 49,334 by late afternoon.

However, if we zoom out to the daily chart, there’s a clear “W pattern” forming in Banknifty. Such a pattern often hints at a potential reversal from a downtrend to a more bullish phase. If tomorrow’s opening is either flat or slightly gap-up, I’ll be watching to see if 50,000 could be the next round-level target. A gap-down, on the other hand, might cause confusion and disrupt the “W pattern” narrative, making me cautious about entering new trades unless I see a solid lower-level breakdown with convincing price action.

Nifty seems to mirror this “W pattern” idea, though not as neatly as Banknifty. A flat or small gap-up open could pave the way for a rally toward 23,500–23,600, or even 23,650. But again, a gap-down would inject uncertainty, and I’d prefer to stay out until the charts make sense.

1. Be Patient with Big Gap-Ups: When the market opens significantly higher, it can mean the easiest moves are already over. Waiting for a more reliable setup can prevent chasing trades that go nowhere.
2. Watch for Index Divergence: Nifty and Banknifty often move together, but not always. Today, Banknifty stayed strong while Nifty retraced and filled its gap. Such divergence can be a warning sign that the market isn’t offering a clean, synchronized move.
3. One Good Trade Is Enough: My successful 48500 PE Sell demonstrates the value of waiting for the right moment. A single well-timed trade can be more profitable and less stressful than multiple forced trades.
4. Breakouts Need Confirmation: Nifty broke above its day high but lacked strong momentum candles, leading to a consolidation rather than a big rally. Confirmation is key—especially if you’re planning to hold for a bigger target.
5. Mind the “W Patterns”: Both Banknifty and Nifty are showing potential reversal formations on the daily charts. How they open tomorrow will matter. A gap-up could validate the pattern, while a gap-down might invalidate or delay it.

With these lessons in mind, I’ll keep a close watch on whether the “W patterns” turn into actual rallies or whether tomorrow brings fresh surprises. After all, the market tends to reward those who stay patient and disciplined, especially when the charts signal caution. A single decisive move can be enough to make your day, provided you have the right entry, target, and—most importantly—the discipline to stick to your plan.