Nifty targets 18800, Bank Nifty may hit 40400 as charts suggest; RIL, ZEEL, Adani Ports top money-making bets

Updated: October 18, 2021 9:34 AM

Nifty is trading above 20 and 50-day SMAs which are important short term moving averages, indicating positive bias in the short term

Nifty, bank niftyThe strategy which we are suggesting for the weekly EXPIRY is a Bearish strategy namely PUT LADDER

By Rajesh Palviya

On the weekly chart, the Nifty 50 index has formed a long bullish candle forming a higher High-low compared to the previous week and has closed above the previous four weeks’ 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 the 18400 level it would witness buying which would lead the index towards 18500-18800 levels. However, if the index breaks below the 18050 level it would witness selling which would take the index towards 17800-17600.

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 18500-18000 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 18355 on a positive note with a -4.25% decrease in open interest and with a price gain of 2.54% indicating short covering. PCR OI currently is at 1.53 levels which is well above the median line and slightly on the higher side indicating positive bias in the market, but with a caution at higher levels.

Options Built up shows that for now Nifty has strong support at 17,800 followed by 18,200 & 18,000 and resistance at 18,500 levels followed by 19,000. Nifty 18,500, 19,000 & 18,200 strike CALL while 18,000 & 18,200 PUT strike has high open interest concentration which suggests that Nifty is likely to trade between these levels of 18,500 on upside & 18,000 on downside for the coming week with 18,200 acting as a pivotal levels

Bank Nifty Outlook

On the weekly chart, Bank Nifty has formed a sizable bullish candle forming higher High-low compared to previous session indicating positive bias. 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 39400 level it would witness buying which would lead the index towards 39800-40400 levels. However if the index breaks below 38600 level it would witness selling which would take the index towards 38200-37800. Bank Nifty is trading above 20, 50, and 100 day SMA’s 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 40400-38700 with a positive bias.

The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.

FII activity in the index futures had been on the ‘buy’ side during the last week. There was an increase in open interest during the last week by 21,620 contracts. FII have been net buyers in Index Future to the tune of 2,728 crores during the last week. Bank Nifty has a strong support at 39,000; as 39,000 Put strike is having high OI concentration followed by 38,000 & 38,500 while on the Call front 39,500CE strike has high OI concentration indicating strong resistance level followed by 40,000.

Sectors and stocks to watch this week

We expect automobile, realty, capital goods, FMCG, banking, power and metal sectors to do well in the near term. Stocks such as Grasim Industries, L&T, State Bank of India (SBI) , Indiabulls Real Estate, Reliance Industries Ltd (RIL), Adani Ports, Adani Enterprises, Mcdowell Holdings, Coal India, IndiGo, Tata Steel, Zee Entertainment Enterprises likely to show bullishness in near term.

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

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