Nifty index opened positive and headed towards 8,587 levels but failed to hold its gain and corrected below 8,500 zones. It negated its positive formation of making higher high – higher low of last five sessions as it failed to surpass last sessions high of 8,594.80 and slipped below low of 8,510 mark. Although medium term trend is intact to positive but short term supply trend line and mechanical indicators started to hint at overbought scenario. It has seen a strong rally of around 667 points so a small profit booking decline might attract a fresh leg of rally to the broader indices.
It formed a spinning top candle which indicates that bears are again back to the market and trying to push the index towards the next major support zones.
Now if it sustains below 8,510 zones then a profit booking decline may be seen towards 8,440 then 8,350 zones while holding above 8,550 may continue the strength for an up move towards 8,650-8,700 zones.
On the option front, maximum Put open interest (OI) is at 8,400 followed by 8,300 strike while maximum Call OI is at 8,600 followed by 8,700 strike. We have seen fresh Call writing at 8,500 and 8,600 strike which will keep the limited upside.
INDIA VIX jumped by 2.22 per cent at 15.98 levels.
Bank Nifty formed a Shooting Star candle on daily chart and failed to hold above 19,000 zones on closing basis. It has support near to 18,750 then 18,500 zones while immediate hurdle exists at 19,250 zones.
(The author is derivatives analyst, equity research at Anand Rathi Financial Services)