Nifty to see profit booking, use Long Strangle for 22 Sep F&O expiry; Bank Nifty looks mixed this week | The Financial Express

Nifty to see profit booking, use Long Strangle for 22 Sep F&O expiry; Bank Nifty looks mixed this week

For the week, we expect Nifty to trade in the range of 16900-18100 with mixed bias

Nifty to see profit booking, use Long Strangle for 22 Sep F&O expiry; Bank Nifty looks mixed this week
The strategy we are suggesting is a market-neutral strategy called Long Strangle for weekly expiry at 22 September 2022.

By Rajesh Palviya

On the weekly chart NSE Nifty 50 index has formed a Bearish Engulfing candle with an upper shadow indicating selling around 18100 level. The chart pattern suggests that if Nifty crosses and sustains above 17700 level it would witness buying which would lead the index towards 17900-18100 levels. However if the index breaks below 17400 level it would witness selling which would take the index towards 17100-16900. For the week, we expect Nifty to trade in the range of 16900-18100 with mixed bias. The weekly strength indicator RSI is above its respective reference lines indicating positive bias in the medium term. Whereas daily RSI given a cross over below its respective reference lines indicating that some profit booking is expected in the short term.

Also read: Nifty may fall below 17500 if weakness persists, US Fed may hike rate by 100 bps; watch out for these levels

Bank Nifty Outlook
On the weekly chart, the Nifty Bank index has formed a Bullish candle with a long upper shadow indicating selling at higher levels. The index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating positive bias. The chart pattern suggests that if Bank Nifty crosses and sustains above 41150 level it would witness buying which would lead the index towards 41500-41900 levels. However if index breaks below 40500 level it would witness selling which would take the index towards 40150-39850. For the week, we expect Bank Nifty to trade in the range of 41900-39850 with mixed bias. The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.

Also read: Nifty may slip below 17400, resistance at 17777; buy these two stocks to pocket short-term gains

Sectors, stocks to watch this week
We expect the Chemical, FMCG, Banking and Financial, and Defense sectors to do well in the near term. One can focus on stocks like Marico, Tata Power, ICICI Bank, SRF, Navin Fluorine, Sumichem, Cipla, BDL, L&T for upward momentum.

NSE Nifty 50 trading strategy for 22 Sep F&O expiry
The strategy we are suggesting is a market-neutral strategy called Long Strangle for weekly expiry at 22 September 2022.This strategy involves buying of (OTM) 17,600 CALL & 17,500 PUT one lot each having premium of 144 & 142 respectively making a total premium outflow of Rs 14,300 (286 points). As it’s a debit spread, from profit perspective this strategy can generate theoretically unlimited profit while the loss is restricted to total premium paid if Nifty closes near the long options on expiry; however once Nifty on expiry if closes above the upper breakeven level of 17,886 or the lower breakeven level of 17,314 and sustains on either side then the profit can be unlimited. It’s advisable to maintain a combine premium (i.e add premium of call + put together) stop loss of 100-90 points so that if Nifty doesn’t make a strong move then losses can be curtailed by following the above mentioned stop loss or else Traders as per there risk appetite can even hold till expiry.

(Rajesh Palviya, Vice President – Research ( Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)

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