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. Nifty closed at 18117 with a gain of 330 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 also closed above the same indicating positive bias.
The chart pattern suggests that if Nifty crosses and sustains above 18300 level then it would witness buying which would lead the index towards 18500- 18700 levels. However if index breaks below 18000 level it would witness profit booking towards 17800-17500. For the week, we expect Nifty to trade in the range of 18700-17500 with mixed bias. The weekly strength indicator RSI is above its respective reference lines indicating positive bias.
Bank Nifty Outlook
Bank Nifty started the week on a positive note and traded with extreme volatility on either side throughout the week. Bank Nifty closed at 41258 with a gain of 268 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 chart pattern suggests that if Bank Nifty crosses and sustains above 41500 level it would witness buying level which would lead the index towards 41700- 42000 levels. However if the index breaks below 41000 level it would witness selling which would take the index towards 40800-40500.
For the week, we expect Bank Nifty to trade in the range of 42000-40500 with mixed bias. The weekly strength indicator RSI and momentum oscillator Stochastic have both turned positive and are above their respective reference lines indicating positive bias. Sectors and Stocks to keep in focus – We expect the Metal , Banking , Cement and Automobile sectors may do well . One can keep Stocks in focus for the coming week like JSWSTeel , Canbank , Bankbaroda & Federal bank ,Ambuja Cement , M&M , TVSmotors , MGL ,Exide Ind.
Nifty Strategy for coming week
The strategy which we are suggesting for this weekly expiry dated 10th November is a Moderately Bullish strategy called as CALL LADDER, which involves Buying of one lot of NIFTY 18,100 Call @ 137 & selling of one lot of 18,250 Call @ 88 & one lot of 18,400 Call @ 26. The cost of the strategy involves outflow of Rs 1,150/- which is the maximum loss if NIFTY trades & closes below 18,100 levels on expiry .On expiry the maximum profit of Rs 6,350/- will be attained above 18,250 levels, while strategy will start making loss if Nifty crosses 18,500, hence it’s advisable to exit the strategy in total to avoid UNLIMITED losses above 18,500. Break Even points of the strategy are 18,123 on down side & 18,527 on the Up side.
(Rajesh Palviya, Vice President – Research ( Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)