By Rajesh Palviya
Nifty closed at 17369 with a gain of 16 points. On the daily chart index has formed a bullish candle however it remained restricted within the previous session’s High-Low range indicating the absence of strength on either side. The index is moving in a Higher Top and Higher Bottom formation on the daily chart indicating a sustained up trend. The chart pattern suggests that if Nifty crosses and sustains above 17400 level it would witness buying which would lead the index towards 17500-17600 levels.
The daily strength indicator RSI is moving upwards and is above its reference line indicating positive bias.
Nifty Derivative Outlook
Nifty futures closed at 17364.3 on a positive note with a marginal decrease of 0.84% in open interest and with marginal price gains of 0.20% indicating Short Covering. Nifty annualized volatility index, India Vix, has decreased to 13.94% from 14.54 down by -4.13%. PCR OI currently is at 1.45 levels which is above the median line & in a comfortable zone indicating positive bias in the market.
Options built up shows that for now Nifty has strong support at 17,200 followed by 17,000 & 16,500
Options built up shows that for now Nifty has strong support at 17,200 followed by 17,000 & 16,500 and resistance at 17,500 levels followed by 17,400 & 18,000. And 17,300, 17,400 & 17,500 strike CALL and 17,000 strike Put followed by 17,200 & 17,300 strike has high open interest concentration which suggests that Nifty is likely to trade between these levels of 17,500 on upside & 17,200 on downside for the coming week; with 17,300 acting as a pivotal level as both Call & Put have high OI concentration at 17,300 strike price.
Bank Nifty Outlook
Bank Nifty opened with a downward gap and traded with extreme volatility on either side and witnessed short covering at the end of the day. Bank Nifty closed at 36683 with a loss of 85 points. On the daily chart index has formed a bearish candle however it remained restricted within previous session’s High-Low range indicating absence of strength on either side. The index is moving in a Higher Top and Higher Bottom formation on the daily chart indicating a sustained up trend.
Important support for the day is around 36500
The chart pattern suggests that if Bank Nifty crosses and sustains above 36800 level it would witness buying which would lead the index towards 37000-37300 levels. Important support for the day is around 36500. However if the index sustains below 36500 then it may witness profit booking which would take the index towards 36300-36000 levels. Bank Nifty is trading above 20 and 50 day SMAs indicating positive bias in the short to medium term. Bank Nifty continues to remain in an uptrend in the medium and long term, so buying on dips continues to be our preferred strategy.
The daily strength indicator RSI is moving upwards and is above its reference line indicating positive bias.
Bank Nifty Derivative Outlook
Bank Nifty futures closed at 36772.55 on a negative note with an 8.39% decrease in open interest and a marginal price cut of 0.34% indicating Long Unwinding. Bank Nifty has a strong support at 36,000; as 36,000 Put strike is having high OI concentration followed by 35,500 & 35,000 while on the Call front 37,000CE strike has high OI concentration indicating strong resistance level followed by 37,500 & 38,000
Nifty 50 trading strategy
The strategy which we are suggesting for this weekly expiry dated 16th September is a Bullish strategy called as CALL LADDER, which involves Buying of one lot of NIFTY 17,350 Call @ 105 & selling of one lot each of 17,500 Call @ 59 & one lot of 17,650 Call @ 13. Call Ladder, although being a limited profit & unlimited risk strategy; is an extension to the bull call spread and to further bring down the cost of the premium one more extra leg of OTM call is sold and hence any move above the sold leg can incur unlimited loss.
The maximum profit of Rs 5,850 will be attained at 17,500 levels, while strategy will start making loss above 17,767. The cost of the strategy involves outflow of Rs 1,650 which is the maximum loss if Nifty trades & remains below 17,383 levels at expiry, however above 17,767 it’s advisable to exit the strategy in total to avoid unlimited losses. Break Even points of the strategy are 17,767 on Upside & 17,383 on the lower side.
Sectors and stocks to watch in coming trading sessions
We expect FMCG, IT, capital goods, chemical, cement and Metal sectors to do well in the near term. Stocks such as Dabur India, Mcdowell Holdings, Tata Steel, Hindalco Industries, Tech Mahindra, Ambuja Cements, L&T, Kotak Mahindra Bank, Bharti Airtel, Reliance Industries Ltd (RIL), Deepak Nitrite, Metropolis Healthcare can do well in near term .
(Rajesh Palviya is Vice President– Research (Head Technical & Derivatives) at Axis Securities Limited. The views expressed are the author’s own. Please consult your financial advisor before investing.)
