Nifty to trade at 17400-18000 this week, use bull call spread for 18 Aug F&O expiry; SBI, ICICI Bank in focus

For the week, we expect Nifty to trade in the range of 18000-17400 with a positive bias. The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.

Nifty to trade at 17400-18000 this week, use bull call spread for 18 Aug F&O expiry; SBI, ICICI Bank in focus
Traders can initiate a Moderately Bullish strategy with reduced premium outflow & lower breakeven point called BULL CALL SPREAD of 18th August Expiry

By Rajesh Palviya

NSE Nifty 50 closed at 17698 with a gain of 301 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 17800 level it would witness buying which would lead the index towards 18000-18300 levels. However if the index breaks below 17600 level it would witness selling which would take the index towards 17300-17000. For the week, we expect Nifty to trade in the range of 18000-17400 with a positive bias. The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.

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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 39042 with a gain of 1122 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 39300 levels it would witness buying which would lead the index towards 39700-40100 levels. 

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However if the index breaks below 38500 level it would witness selling which would take the index towards 38000-37200. For the week, we expect Bank Nifty to trade in the range of 40100-37200 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 sectors like Banking, Financial, Chemical, Capital Goods, Automobile and Real Estate may do well in the near-term. Stocks like SBI, ICICI Bank, HDFC Bank, Bajaj Finserv, HDFC, Canfin Home, Siemens, ABB, Cummins India, M&M, Tata Motors, Eicher Motors, DLF, and Oberoi Realty are likely to show bullishness in near term.

NSE Nifty 50 trading strategy for this week

Nifty futures closed on a positive note with 6.03% increase in open interest and price gain of 1.70% indicating Long Build Up and hence traders can initiate a Moderately Bullish strategy with reduced premium outflow & lower breakeven point called Bull Call Spread of 18th August Expiry wherein trader can buy one lot of 17,700 call strike @ 105 and simultaneously sell one lot of 17,900 call strike @31, so that net outflow or maximum loss will be restricted to up to Rs 3,700. Nifty on expiry if closes above 17,774 the strategy will start making profits. The maximum gains will be restricted up to Rs 6,300; because the gains of a long 17,700 strike call will be offset by the sold 17,900 strike call if Nifty closes above 17,800 on expiry.

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

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