Nifty needs to move above 17550 for more upside, Bank Nifty may see buying above 36900

Nifty is trading below 20 and 50 day SMA’s which are important short term moving averages, indicating negative bias in the short to medium term.

Nifty futures closed at 17239 on a negative note with 4.21% decrease in the open interest indicating Long Unwinding. (Image: REUTERS)

By Rajesh Palviya

On the weekly chart the index has formed a “Doji” candlestick formation indicating indecisiveness amongst market participants regarding the direction. The index is moving in a Lower Top and Lower Bottom formation on the daily chart indicating negative bias. The chart pattern suggests that if Nifty crosses and sustains above 17550 level it would witness buying which would lead the index towards 17700-17800 levels. However, if the index breaks below the 17100 level it would witness selling which would take the index towards 16900-16600.

Nifty is trading below 20 and 50 day SMA’s which are important short term moving averages, indicating negative bias in the short to medium term. Nifty continues to remain in a downtrend in the short to medium term, so selling on rallies continues to be our preferred strategy. For the week, we expect Nifty to trade in the range of 17700-16900 with mixed bias. 

The weekly strength indicator RSI and momentum oscillator Stochastic have both turned negative and are below their respective reference lines indicating negative bias.

Derivative Outlook :

Nifty futures closed at 17239 on a negative note with 4.21% decrease in the open interest indicating Long Unwinding. Nifty Futures closed at a premium of 11 points compared to the previous day premium of 32 points. India VIX index is at 18.39 v/s 19.45. Nifty ATM call option IV is currently 16.06 whereas Nifty ATM Put option IV is quoting at 16.35. Index options PCR is at 0.91 v/s 1.19 & F&O Total PCR is at 0.96. 

Nifty Put options OI distribution shows that 17000 has the highest OI concentration followed by 17200 & 16800 which may act as support for current expiry. Nifty Call strike 17500 followed by 17400 witnessed significant OI concentration and may act as resistance for current expiry.

Bank Nifty outlook:

Bank Nifty started the week on a flat note and remained subdued in a narrow trading range (36800-35300) for the most part of the week. Bank Nifty closed at 36197 with a gain of 172 points on a weekly basis. 

On the weekly chart the index has formed a “Doji” candlestick formation indicating indecisiveness amongst market participants regarding the direction. The index is moving in a Lower Top and Lower Bottom formation on the daily chart indicating negative bias. The chart pattern suggests that if Bank Nifty crosses and sustains above 36900 level it would witness buying which would lead the index towards 37300-37800 levels. However, if index breaks below 35800 level it would witness selling which would take the index towards 35500-35100. Bank Nifty is trading below 20, 50 and 100 day SMA’s which are important short term moving average, indicating negative bias in the short to medium term. Bank Nifty continues to remain in a downtrend in the short to medium term, so selling on rallies continues to be our preferred strategy. For the week, we expect Bank Nifty to trade in the range of 37800-34800 with mixed bias. 

The weekly strength indicator RSI and momentum oscillator Stochastic have both turned negative and are below their respective reference lines indicating negative bias.

Bank Nifty

Derivative Outlook :

BankNifty Put options OI distribution shows that 36000 has highest OI concentration followed by 36500 & 36200 which may act as support for current expiry. 

BankNifty Call strike 36500 followed by 36700 witnessed significant OI concentration and may act as resistance for current expiry.

Sectors and Stocks to focus for coming week:

We expect IT , Chemicals , Capital Goods , Real Estate and Oil & Gas sector can do well in near term . One can focus on Stocks like Deepak Nitrite , Voltas , Astramicro , Polyplex , TCS , Techm , Gmrinfra , IDEA , IGL can do well in near term .

(Rajesh Palviya is the Vice President – Research ( Head Technical & Derivatives) at Axis Securities  Limited. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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