we can see the Nifty reaching the 200% ‘Fibonacci Retracement’ of last year’s massive decline from Jan’20 high to March’20 low
By Sameet Chavan
We began the inaugural week of the September series with an upside gap on Monday, tad above 16750 and as we progressed, fresh buying kept pushing the benchmark index towards 16950. This wouldn’t have been possible without the specular move in the banking index which finally managed to surpass the sturdy wall of 36200-36300 on a closing basis on the same day. On the subsequent day, the momentum extended further to reach and eventually surpassed the milestone of 17000. The impetus was so strong that we could hardly see any intraday dip to offer a fresh buying opportunity for traders. The Nifty rallied to almost touch 17200 on the same day but the follow-up buying was missing in the banking index.
The day ahead of weekly expiry, we had a cheerful start and the benchmark index clocked fresh record highs of 17225.75 in the early morning trade but unfortunately failed to sustain at higher levels. This profit booking move not only wiped-off all the intraday gains but also dragged the index in the negative territory to eventually conclude the day below 17100. The Bank Nifty showed some outperformance in the initial hour of trade to almost touch the 37000 mark but due to decent profit booking there also; it eventually concluded the day with gains of merely fourth tenth of a percent. However on the weekly expiry day, Nifty shrugged off this mild negativity and had a steady move to close at new highs.
Now let’s take a quick glance at the F&O activity. On the net basis, the majority of the positions formed in first trading sessions were on the long side. Stronger hands too participated by adding longs in equities and stock futures; however, their positions in index futures remained mixed. It would be interesting to see Thursday’s figures as well. As far as Option data is concerned, we can see maximum open interest in 17000 puts followed by 17200 and 17100 strikes; whereas on the higher side, there are no significant positions before 17500 call options.
Nifty has been enjoying a strong Bull run since the last 16 – 17 months and in the last few weeks also, it gave some mesmerizing moves. Although the recent momentum has been extremely strong, we can see some extreme levels in the benchmark index now. If we take a broader view, we can see the Nifty reaching the 200% ‘Fibonacci Retracement’ of last year’s massive decline from Jan’20 high to March’20 low. Also timewise, Nifty has entered 7th zone as per ‘Fibonacci Time Series’ on the monthly time frame chart. We do not want to sound pessimistic but since a couple of important key ratios are coinciding at current levels, becoming too complacent is not a wise ploy. To be on the safer side, we advise traders to keep booking profits in the rally and avoid taking aggressive longs for a while. Yes, momentum traders can still continue with their stock specific trades; but needs to follow strict stop losses and booking timely profit is advocated.
(Sameet Chavan is Chief Analyst – Technical and Derivatives, Angel Broking. Views expressed are the author’s own.)