Technicals: Nifty forms ‘Hammer’ on daily chart

By: |
Mumbai | Published: June 22, 2016 4:42:39 PM

Nifty index opened negative and after an early consolidation move it broken previous day’s low of 8,202 and corrected towards 8,150 zones.

nifty technial viewNifty index opened negative and after an early consolidation move it broken previous day’s low of 8,202 and corrected towards 8,150 zones. (Express photo)

Nifty index opened negative and after an early consolidation move it broken previous day’s low of 8,202 and corrected towards 8,150 zones. However it recovered its three fourth of early morning losses and managed to close near psychological 8,200 mark. In the entire process it formed a Hammer candle on daily chart which indicates that bulls are ready to support the market on declines but upside seems to be limited in the absence of follow up buying interest.

Overall index has been consolidating in a broader range of 8,065 to 8,300 zones from last nineteen trading sessions and now a range breakout on either side would decide the next leg of rally in the market.

Immediate trade setup is still bullish as market has been making higher bottom and it has immediate support at 8,150 then 8,065 while on the upside hurdle exists at 8,242 then 8,300 zones. If it manages to hold above 8,242 then also we may get an early sign of breaking 8,300 then an extended move towards 8,450-8,500 zones.

India VIX moved up by 5.40 per cent at 18.20 mark. We have seen a surge in Volatility index after a consolidation of last two – three sessions which indicates that market may turn volatile post the Brexit referendum which will be held on 23th of this week.

Looking at the option data, maximum Put OI is at intact at 8,000 followed by 8,100 strike while maximum Call OI is at 8,300 followed by 8,400 strike. We have seen sustained Call writing at all the higher strikes which indicates that Call writers are expecting limited upside in the market while intact Put writers would keep the market above 8,065 and 8,000 zones as of now.

Now market is waiting for much discussed Brexit referendum which would decide the next leg of rally of the market so traders are suggested to be light for over leverage position and hedge the position by respective option or option strategy. A hold above 8,242 and below 8,065 may give a further spike of more than 150-200 points in the market.

Bank Nifty formed a Doji candle as after moving up or down in a range it finally closed near to its opening levels. It has support near to 17,500 then 17,350 zones while on the upside multiple supply zones seen at 17,850 and 18,000 mark. Bank Nifty index closed flattish to negative ahead of important Brexit referendum which could give short term volatility to most of the banking and heavy weights stocks.

We are suggesting to be with Long Strangle strategy by buying 8,100 put and 8,300 call in expectation of a range breakout move on either side.

(The author is derivatives analyst- equity research at Anand Rathi Financial Services)

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