Nifty index opened positive but failed to cross 8,700 zones and traded in a flat to negative territory for most part of the day. the 50-share index formed a higher high – higher lows compare to last session but failed to cheer the positive momentum of last sessions and closed near to 8,665 with the loss of 6 points.
Index closed flat to negative on both daily and weekly basis but managed to hold the higher lows. It formed a “Hanging Man” candle on daily chart while a “Dragon Fly Doji” with a Harami Cross pattern on weekly chart. Price pattern and behavior indicates an absence of follow up buying beyond 8,700 zones while sustained buying on any meaningful decline is keeping the trend intact.
Now the index has to continue to hold above 8,650 zones to witness an up move towards 8,728 then 8,777 mark while on the downside support exists at 8,600 then 8,540 levels.
On the option front, maximum put open interest is shifted back to 8,500 followed by 8,600 strike while maximum call open interest is at 8,800 followed by 9,000 strike. We have seen fresh call writing at 8,800 and 8,900 strike while put unwinding in 8,600 strike is again giving a cautious move in the market. Overall option data indicates for a limited upside with a range bound move in the market but sustained FIIs flow is keeping the downside limited as well in the market.
India VIX remained flattish near to 14.50 zones which is not giving any clue but indicating for a buy on decline strategy on the broader market.
Bank Nifty has been making higher high – higher lows from last five trading sessions and managed to move by more than 450 points after crossing 19,000 zones. It has support near to 19,000 zones while now hurdle at 19,800 zones on the higher side.
(The author is derivatives analyst, equity research at Anand Rathi Financial Services)