Nifty to trade at 16000-16600 this week, use Call Ladder for 14 July F&O expiry; Bank Nifty to remain positive

The chart pattern suggests that if Nifty crosses and sustains above 16300 levels it would witness buying which would lead the index towards 16500-16700 levels.

Nifty to trade at 16000-16600 this week, use Call Ladder for 14 July F&O expiry; Bank Nifty to remain positive
The strategy which we are suggesting for this weekly expiry dated 14th July is a Moderately Bullish strategy

By Rajesh Palviya

Nifty started the week on a flat note and buying momentum throughout the session led it close on a strong note. NSE Nifty 50 index closed at 16,221 with a gain of 469 points on a weekly basis. On the weekly chart the index has formed a long bullish candle forming higher High-low compared to previous week and has closed above previous week’s high indicating positive bias.

The chart pattern suggests that if Nifty crosses and sustains above 16300 levels it would witness buying which would lead the index towards 16500-16700 levels. However if the index breaks below 16000 level it would witness profit booking which would take the index towards 15800-15600. For the week, we expect the Nifty to trade in the range of 16600-16000 with a positive bias. The  daily and weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias. 

Nifty Derivative Outlook 

Nifty futures closed at 16225 on a positive note with 5.99% decrease in the open interest indicating Short Covering. Nifty Futures closed at a premium of 5 points compared to the previous day premium of 15 points. FIIs were Buyers in Index Futures to the tune of 743 crores and were Sellers in Index Options to the tune of 1039 crores, Buyers in the Stock Futures to the tune of 892 crores. Net Buyers in the derivative segment to the tune of 767 crores.

India VIX index is at 18.24 v/s 19.20. Nifty ATM call option IV is currently 2.96 whereas Nifty ATM Put option IV is quoting at 6.96.

Nifty Put options OI distribution shows that 16100 has highest OI concentration followed by 16000 & 15800 which may act as support for current expiry. Nifty Call strike 16200 followed by 16400 witnessed significant OI concentration and may act as resistance for current expiry.

Bank Nifty Technical Outlook

Bank Nifty started the week on a flat note and buying momentum throughout the week led it close on a strong note. Bank Nifty closed at 35124 with a gain of 1585 points on a weekly basis. On the weekly chart the index has formed a sizable bullish candle and closed above previous week’s high indicating positive bias.

The chart pattern suggests that if Bank Nifty crosses and sustains above 35300 level it would witness buying which would lead the index towards 35500-36000 levels. However if index breaks below 35000 level it would witness selling which would take the index towards 34500-34300. For the week, we expect Bank Nifty to trade in the range of 36000-34300 with a positive bias. The daily and weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias. 

Bank Nifty Derivative Outlook

Bank Nifty closed at 35174 on positive note with 3.81% decrease in open interest indicating Short Covering. BankNifty Futures closed at a premium of 50 points compared to the previous day premium of 62 points. Bank Nifty Put options OI distribution shows that 34900 has highest OI concentration followed by 34800 which may act as support for current expiry.

Bank Nifty Call strike 35000 followed by 34900 witnessed significant OI concentration and may act as resistance for current expiry.

Sectors and stocks for coming week

We expect sectors like Automobile, Capital Goods, FMCG, Banking & Financial, and Cement are likely to show bullishness this week. Stocks like Siemens, ABB India, Tata Motors, TVS Motors, Mahindra & Mahindra (M&M), Hindustan Unilever (HUL), United Spirits, State Bank of India, ICICI Bank, Canara Bank, Bajaj Finance, M&M Fin, Srtransfin, UltraTech Cements, India Cement are likely to show bullishness this week.

NSE Nifty 50 trading strategy for 14 July F&O expiry 

The strategy which we are suggesting for this weekly expiry dated 14th July is a Moderately Bullish strategy called as CALL LADDER, which involves Buying of one lot of NIFTY 16,250 Call @ 114 & selling of one lot each of 16,350 Call @ 70 & one lot of 16,450 Call @ 40. The cost of the strategy involves outflow of Rs 200 which is the maximum loss if Nifty trades and remains below 16,250 levels on expiry .The maximum profit of Rs 4,800 will be attained above 16,350 levels, while strategy will start making loss if Nifty crosses 16,550, hence it’s advisable to exit the strategy in total to avoid unlimited losses above 16,550. Break Even points of the strategy are 16,254 on upside & 16,546 on the lower side.

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

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