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F&O: Nifty needs decisive range breakout for the next leg of rally


By Chandan Taparia

Nifty50 failed to cross Thursday’s high and drifted towards the 10,740 level on Friday. However, buying interest was seen at lower levels, but finally it closed in the negative near the 10,800 mark. The index formed a bearish candle on the daily chart and a small ‘Doji’ candle on the weekly scale, which indicated indecisiveness as followup buying was missing on both sides of the market.

The index has been flirting with its 50-day EMA and continued its alternative positive and negative weekly close for the ninth week. Now, it has to hold above the 10,750-10,777 zone to witness an upward move towards 10,880 and then the towards the crucial hurdle in the 10,925-10,985 zone.

Nifty has been facing a hurdle at its immediate supply trend line that connects the swing highs of 10,985, 10,923 and 10,880 levels and requires a decisive range breakout to commence the next leg of rally. On the downside, if it fails to hold above 10,720, only then can we see a dips towards the 10,650-10,600 zone.

On the options front, maximum Put open interest was at 10,000 followed by 10,500 level, while maximum Call OI was at 11,000 followed by 11,200. There was Call writing at 11,000 followed by 10,900 levels, while Put unwinding was seen at most immediate strike prices. The option band signified an immediate trading range between 10,700 and 10,900 levels.

India VIX remained flattish and moved up marginally by 0.08 per cent to 15.35 level. VIX has to hold below 16 mark to again get a bounceback move in the market.

Bank Nifty negated the formation of higher highs on the daily scale but managed to hold above the 27,350-27,400 zone. It formed a bearish candle on the daily scale, but continued to form higher highs and higher lows on the weekly scale. Now it has to hold above the 27,350-27,400 zone to extend its gains towards the 27,750 mark, while on the downside support exists in the 27,150-27,000 zone.

Nifty futures closed in the negative at 10,813 with a loss of 0.41 per cent. Long buildup was seen in ICICI Pru, Torrent Pharma, Mindtree, Muthoot Finance, Repco Home, DCB Bank and KPIT, while shorts were seen in Arvind, Just Dial, TCS, IndusInd Bank, Tata Motors and Indigo.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)

Source: Economic Times