A Gap-Down Open, Missed Trends, and a Hesitant Trading Day

The market resumed this week with a sharp gap-down, catching many off guard despite global indicators hinting at a negative start. Banknifty opened at 48,619.80 (down –361.40 points), while Nifty gapped –186.55 points lower at 22,609.35.

Below is how the session played out for me, including insights from the weekend analysis, OI data confusion, and a couple of stop-outs that shaped my day.

Before the open, I spent time on pre-market analysis. Nasdaq had ended in the red on its previous trading day, and various financial videos and commentators over the weekend discussed the possibility of a gap-down in Indian indices.

Lately, I’ve been keeping an eye on Open Interest (OI), noting sizable volumes in crores at the 22,800, 22,700, and 22,600 strikes for Nifty, and 48,500, 49,000, 49,500, 48,000, 47,500 for Banknifty indicating strong support and resistance at key levels. But around 9:08 AM, my OI data strangely reset to zero—a phenomenon I’m still not entirely familiar with, possibly indicating how fresh OI accumulates once the market officially opens at 9:15 AM.

My initial plan was to see if the market would fill the gap early. I switched to a 1-minute timeframe for a quick look. Neither Nifty nor Banknifty formed a bullish break above their first red candle. The slide continued, yet I hesitated. A part of me debated not trading at all—a typical moment when the market often ends up trending decisively.

After I saw the 15-minute setup for a possible breakdown in Banknifty, I still didn’t enter because OI data suggested heavy support at 48,500. Indeed, the spot dipped briefly below that level, found support around 48,300, then bounced. Looking back, had I sold something like 48,500 CE at around ₹356.80, capturing 50–70 points was very feasible.

A similar scenario arose in Nifty: shorting 22,600 CE at ₹150.15 for a quick 20-point profit was achievable. However, I remained on the sidelines, uncertain about how strongly the market might reverse.

Despite my reservations, I eventually decided to take a position in Nifty:

• Sold 22,600 CE at ₹128.30, with Stop Loss at ₹144.

Right when I entered, Banknifty began reversing, leaving me with a sinking feeling that my SL might soon get triggered. Around the same time, I spotted an inside candle on Banknifty’s 15-minute chart, which I interpreted as a potential bullish sign:

• Banknifty: Sold 48,500 PE at ₹294.85, SL near ₹304.

I ended up hitting SL in Banknifty first. Hopes that Nifty would compensate quickly faded as my Nifty SL was taken out too. Each trade netted a small loss, reinforcing the notion that early decisions in a volatile session can be especially punishing if the market quickly pivots.

By 10:30 AM, Nifty and Banknifty were each down substantially—Nifty by over 250 points and Banknifty by around 500 points. Instead of diving further, both indices consolidated, which eventually led to a modest midday bounce:

• Nifty soared from 22,550–22,579 to near its gap-open price around 22,609.
• Banknifty formed a “w” pattern, also testing its opening price before retreating slightly.

Had I been more focused on 15-minute breakouts post-lunch, I might have spotted a chance to sell 22,600 CE around ₹135.85 for a quick 20-point scalp. But my mood was soured by the earlier losses, and I opted not to chase any further trades.

I ended up hitting SL in Banknifty first. Hopes that Nifty would compensate quickly faded as my Nifty SL was taken out too. Each trade netted a small loss, reinforcing the notion that early decisions in a volatile session can be especially punishing if the market quickly pivots.

1. Trust the First Breakdown or Breakout: When the market doesn’t fill its gap and shows consistent selling, an early short position can pay off if done carefully.
2. OI Data vs. Actual Price: Watching OI can guide expectations, but if price action is strongly pointing one way, lingering support levels might only offer brief bounces. Also not OI data plays well on expiry days.
3. Avoid Emotional Decisions Post-SL: My trades were small in scope and repeated losses diluted my confidence. Sometimes stepping away or waiting for a clearer midday setup yields better results.
4. Refine Exit Discipline: Quick scalp strategies in a falling market require equally swift decisions to lock profits if the trend starts reversing.