Nifty to trade at 17100-16400 this week, Bank Nifty looks positive; use Iron Butterfly for 28 July F&O expiry

The chart pattern suggests that if Nifty crosses and sustains above 16800 levels it would witness buying

Nifty to trade at 17100-16400 this week, Bank Nifty looks positive; use Iron Butterfly for 28 July F&O expiry
Nifty is likely to find a strong support at 16,500

By Rajesh Palviya

Nifty started the week with an upward gap and buying momentum for most part of the week led it to close on a strong note. NSE Nifty 50 closed at 16719 with a gain of 670 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.

Nifty is trading above 20,50 and 100 day moving averages which indicates short term strength. The chart pattern suggests that if Nifty crosses and sustains above 16800 levels it would witness buying which would lead the index towards 17000-17100 levels. However, if the index breaks below 16600 level it would witness selling which would take the index towards 16400-16200. For the week, we expect Nifty to trade in the range of 17100-16400 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 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 36739 with a gain of 2056 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. Bank Nifty is now sustaining above all its imp (50,100, and 200 dma) long and short term moving averages indicates bullish bias ahead.

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 the index breaks below 36200 level it would witness selling which would take the index towards 36000-35500 levels.

For the week, we expect Bank Nifty to trade in the range of 37800-35800 with a positive bias. The daily and 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 the Automobile, Capital goods, Banking and Financial, Cement, Chemical and FMCG sectors may show bullishness. Stocks like Eicher Motors, Escorts, Tata Motors, Siemens, Cummins India, ICICI Bank, State Bank of India (SBI), Bajaj Finance, Srtransfin, Ultratech Cements, Grasim Industries, Deepak Nitrite, UPL, Dabur India, and Marico may show strength this week.

NSE Nifty 50 trading strategy for 28 July F&O expiry

The strategy which we are suggesting for the week with expiry schedule on 28th July 2022 is IRON BUTTERFLY, which involves selling of one lot of Nifty 16,700Call @ 137 & selling of one lot of Nifty 16,700 Put @ 120 and simultaneously buying one lot of 16,400 Call @ 29 & buying one lot of 17,000 put @ 29. Both risk and reward in this strategy are limited and the gains in the strategy will be accrued between two levels i.e 16,900 on upside & 16,500 on downside. The Nifty is likely to find a strong support at 16,500 as 16,500 put have high OI concentration while upside is likely to be restricted to 17,000 as per the option data. Maximum profit of Rs 9,700 will happens if the Nifty closes/expires at 16,700. On the other hand if Nifty expiry close is above 17,000 (upper bep) or below 16,500 (lower bep) then maximum loss incurred will be Rs 5,300.

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

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