By Rajesh Palviya
NSE Nifty 50 started the week on a negative note however buying momentum at lower levels recovered some of the earlier losses to close on a flat note. Nifty closed at 17539 with a loss of 19 points on a weekly basis. On the weekly chart the index has formed a small Bullish candle carrying a long upper shadow indicating resistance at higher levels. Options Built up shows that for now Nifty has strong support at 17,300 followed by 17,000, While 18,000, 17,600 & 17,800 strike CALL has high open Interest concentration likely to act as resistance.
The chart pattern suggests that if Nifty crosses and sustains above 17800 level it would witness buying which would lead the index towards 18000-18300 levels. However, if the index breaks below 17400 level it would witness selling which would take the index towards 17200-17000 .For the week, we expect Nifty to trade in the range of 18300-17400 with mixed bias. The weekly strength indicator RSI is above its respective reference lines indicating positive bias.
Bank Nifty outlook
Bank Nifty started the week on a negative note but witnessed buying at lower levels to end the week on a positive note. Bank Nifty closed at 39421 with a gain of 434 points on a weekly basis .On the weekly chart the index has formed a sizable bullish candle forming higher High-Low compared to previous week indicating positive bias. Bank Nifty has a strong support at 39,000; as 39,000 Put strike is having high OI concentration followed by 38,500& 38,000 while on the Call front 39,500CE strike has high OI concentration indicating strong resistance level followed by 41,000 & 40,000; with 40,000 acting as a pivotal level.
The chart pattern suggests that if Bank Nifty crosses and sustains above 39800 levels it would witness buying which would lead the index towards 40200-41000 levels. However if index breaks below 38800 level it would witness selling which would take the index towards 38500-37800. For the week, we expect Bank Nifty to trade in the range of 41000-38500 with mixed bias. The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.
Sectors and stocks to watch this week
We expect sectors like Capital Goods, Automobiles, Real Estate, Chemical, Banking and Financial and FMCG are likely to behave in a bullish manner. One can focus on stocks like M&M, TVS Motors, Ashok Leyland, Siemens, L&T, DLF, Oberoi Realty, SRF, Nocil, HDFC Bank, Bajaj Finserv, Cholamandalam Financial, UBL, Hindustan Unilever, Sun TV for bullish bets.
Nifty 50 trading strategy for 8th Sep F&O expiry
The strategy which we are suggesting for the week with expiry schedule on 8th September 2022 is IRON BUTTERFLY, which involves selling of one lot of Nifty 17,550Call @ 150 & selling of one lot of Nifty 17,550 Put @ 161 and simultaneously buying one lot of 17,900 Call @ 32 & buying one lot of 17,200 put @ 48. Both risk and reward in this strategy are limited and the gains in the strategy will be accrued between two levels i.e 17,800 on upside & 17,300 on downside. Maximum profit of Rs 11,550 will happen if the Nifty closes/expires at 17,550. On the other hand, if Nifty expiry closes is above 17,781 (upper bep) or below 17,319 (lower bep) then strategy will start making loss; while any close above 17,900 or below 17,200 then the max loss will be restricted to Rs 5,950.
(Rajesh Palviya, Vice President – Research ( Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)