Nifty to trade in 17600-18300, Bank Nifty remains positive; watch out for these levels this week

Updated: September 27, 2021 9:04 AM

The chart pattern suggests that if Nifty crosses and sustains above 17950 level it would witness buying which would lead the index towards 18100-18300 levels

Nifty, bank nifty, stock marketBank Nifty Put options OI distribution shows that 38,000 has highest OI concentration followed by 37,500 & 38,500 which may act as support

Nifty closed at 17853 with a gain of 268 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 index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating positive bias. The chart pattern suggests that if Nifty crosses and sustains above 17950 level it would witness buying which would lead the index towards 18100-18300 levels.

However, if index breaks below 17650 level it would witness selling which would take the index towards 17500-17250. Nifty is trading above 20 and 50 day SMAs 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 18300-17600 with a positive bias.

The weekly strength indicator RSI is above its respective reference lines indicating positive bias.

Nifty Derivative Outlook

Nifty futures closed at 17853.6 on a positive note with a (-)16.54% decrease in open interest and with a price gain of 1.42% indicating short covering. PCR OI currently is at 1.27 levels which is above the median line and in a comfortable zone indicating positive bias in the market. FIIs have been net sellers in index futures to the tune of 2,808 crore during the last week.

This week major addition in monthly expiry was seen on the PUT front with 17,800 17,700 and 17,500 strikes adding 25.95 lakh, 21.99 lakh and 13.94 lakh shares in OI respectively; while there was no significant unwinding witnessed in any strike.

There was an increase in Open Interest during the last week by 15,252 contracts. Options built up shows that for now Nifty has strong support at 17,500 followed by 17,700 & 17,800 and resistance at 17,900 levels followed by 18,000 & 18,200.

While 17,900, 18,000 & 18,200 strike CALL and 17,500 strike Put followed by 17,700 & 17,800 strike has high open interest concentration which suggests that Nifty is likely to trade between these levels of 18,100 on upside and 17,500 on downside this week.

Bank Nifty Outlook

Bank Nifty started the week on a negative note and remained extremely volatile on either side throughout the week. Bank Nifty closed at 37830 with a gain of 18 points on a weekly basis. On the weekly chart the index has formed a small bullish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction. The index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating sustained up trend on long term charts.

The chart pattern suggests that if Bank Nifty crosses and sustains above 38100 level it would witness buying which would lead the index towards 38500-38800 levels. However, if index breaks below 37200 level it would witness selling which would take the index towards 36500-36200. Bank Nifty is trading above 20, 50, and 100 day SMAs which are important short term moving averages, indicating positive 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 38800-37000 with a positive bias. The weekly strength indicator RSI and momentum oscillator Stochastic have both turned positive and are above their respective reference lines indicating positive bias.

Bank Nifty Derivative Outlook

Bank Nifty closed at 37854 on a negative note with an 8.79% decrease in open interest indicating Long Unwinding. Bank Nifty has a strong support at 37,000; as 37,000 Put strike is having high OI concentration followed by 37,500 & 36,000 while on the Call front 38,000CE strike has high OI concentration indicating strong resistance level followed by 38,500 & 39,000.

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

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