On the weekly chart the index has formed a Bearish candle with an upper shadow indicating selling at higher levels.
By Rajesh Palviya
Nifty started the previous week on a flat note and traded with extreme volatility on either side throughout the week. However, Friday’s sell-off dragged index lower to end near low’s. Nifty closed at 16451 with a loss of 79 points on a weekly basis.
On the weekly chart the index has formed a Bearish candle with an upper shadow indicating selling at higher levels. This formation resembles to “Shooting Star” a short-term trend reversal pattern however any follow up close below 16376 may confirm above mentioned pattern. The chart pattern suggests that if Nifty crosses and sustains above 16500 level it would witness buying which would lead the index towards 16700-16800 levels. However if the index breaks below 16300 level it would witness selling which would take the index towards 16200-16000. Nifty is trading above the 20 and 50 day SMA which are important short term moving averages, indicating positive bias in the short term. Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Nifty to trade in the range of 16600-16200 with mixed bias.
The weekly strength indicator RSI is above its respective reference lines indicating positive bias.
Derivative Outlook :
Nifty Futures in current week has seen Long Unwinding with a price cut of -84 points (-0.51%) and OI shedding of 27.69lac shares (-20.29%) decreasing from 136.47Lac share to 108.78Lac shares indicating profit booking and traded at discount of -17 points compared to discount of -12 points in last week. The sentiment indicator PC Ratio (Nifty) is currently trading at 1.21 from 1.73 of last week; which is above the median line but in a comfortable zone indicating positive bias. Nifty highest OI on the CALL side in the monthly expiry scheduled 26th August is at 16,500(49.77L) , 16,600(44.05L) & 16,700(41.10L) strikes respectively wherein writing of 23.62Lac shares was witnessed at 16,500 strike & 13.72Lac shares of writing was seen at 16,600 strike indicating strong resistance zone at 16,500-16,600, while on the PUT side highest OI is at 16,400(42.79L) & 16,000(43.72L) strikes; wherein writing of 13.52Lac & 8.71Lac share was seen at 16,400 & 16,300 strikes respectively indicating a strong support zone for the current expiry; while unwinding of 10.54L & 11.73L was seen at 16500 & 16600 put. So the most probable range for the monthly expiry is likely to be between 16,300 to 16,600.
Banknifty Outlook :
Bank Nifty started the week on a flat note however selling pressure throughout the week led the index to end on a weak note. Bank Nifty closed at 35034 with a loss of 1136 points on a weekly basis.
On the weekly chart the index has formed a long bearish candle forming lower High-Low compared to previous week and has closed below its low indicating weakness at current levels. Since the past three months, index is consolidating within 36300-34000 levels indicating short term consolidation. Hence any either side breakout will indicate further direction. The chart pattern suggests that if Bank Nifty crosses and sustains above 35300 level it would witness buying which would lead the index towards 35800-36000 levels. However if index breaks below 34800 level it would witness selling which would take the index towards 34500-34000. Bank Nifty is trading below 20-day and 50-day SMA which are important short term moving averages, indicating negative bias in the short to medium term. Bank Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Bank Nifty to trade in the range of 35800-34000 with mixed bias.
The weekly strength indicator RSI is moving downwards and is quoting below its reference line indicating negative bias. However, momentum oscillator Stochastic has turned positive from the oversold zone indicating a possible consolidation or an up-move in the near term.
Derivative Outlook :
Bank Nifty in current week has seen Long Unwinding with a price cut of -1149 points (-3.17%) and OI shedding of -1.19Lac shares (-6.17%) decreasing from 19.21Lac share to 18.02Lac shares and traded at premium of 29 points compared to 42 points. In Bank Nifty the high OI on the CALL side in the monthly expiry scheduled 26th August is at 36,000(19.70L), 36,500(11.66L) & 35,500(12.38L) strike, with 35,300 & 36,000 acting as a strong resistance wherein there has been writing of 5.39Lac shares & 5.49Lac shares respectively. The high OI concentration on the PUT side is at 34,000(11.35L) & 34,500(9.70L) strike and will be acting as a strong support as there has been of writing of 4.02Lac shares & 3.73Lac shares respectively; while the important level for this expiry will be 35,000 as there has been high OI concentration of 13.44L shares on Call side & 15.68L shares on Put side adding 11.46L & 5.52L shares in OI respectively. Any sustain & decisive move above or below 35,000 will give an important clue for future trend in Bank nifty. The tentative range for the current week is likely to be between 34,000 to 36,000.
Sectors and Stocks for Coming Trading Sessions: We expect IT, FMCG, Capital goods, and Chemical sectors to do well in the near term while Metal, Banking may show some weakness. Stocks like TCS, Mindtree, Wipro, HUL, Britannia, Godrej CP, Navin Flourine can do well in the near term.
(Rajesh Palviya is Vice President– Research (Head Technical & Derivatives) at Axis Securities Limited. The views expressed are the author’s own. Please consult your financial advisor before investing.)