F&O: Open interest in Calls & Puts tells something about Nifty direction

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By Chandan Taparia

The Nifty50 index opened with a gap up and continued its positive momentum towards the 11,078 mark. It registered the highest daily close above 11,000 since February 1, 2018 (Union Budget 2018) and formed an Inverted Hammer candle on daily scale amid some profit booking decline in the last hour of the session.

The index has been making higher highs and higher lows from last eight sessions. Now, it has to hold above 10,975 to extend its gain towards 11,080 and then its lifetime high of 11,171, while on the downside, supports are seen at 10,929 and then 10,888 levels.

Support and resistance levels are shifting higher gradually. As long as it holds above 10,929, the overall trend could remain positive while above 11,080, Nifty may create a fresh leg of new highs.

The BSE Sensex surpassed its previous lifetime high of 36,443 and formed a new record high of 36,699. On the options front, maximum Put open interest was at 10,600 followed by 10,700, while maximum Call OI was at 11,000 followed by 11,100. There was significant Put writing at 11,000, 10,900 and 11,100 levels while Call writing was seen at 11,200 and 11,100. The option band signified an immediate trading range between 10,929 and 11,171 levels.

India VIX fell 2.11 per cent to 12.51.

Bank Nifty opened with a gap up and headed towards its crucial hurdle at 27,165. It formed an Inverted Hammer candle on the daily scale as it slipped more than 150 points from the higher levels. Now, it has to hold above 26,750 to extend its move towards 27,165 and then 27,400, while on the downside, supports exist at 26,600 level.

Nifty futures closed in the positive with a 0.70 per cent gain at 11,015. Long buildup was seen in Arvind, Wipro, MRF, Marico, Reliance, Bajaj Finance, DCB Bank, Tata Communications and HUL while fresh shorts were created in Ajanta Pharma, Adani Ports, PC Jeweller, Star, Federal Bank, Torrent Power, Tata Global and Grasim.

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

Source: Economic Times