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F&O: Avoid long positions, every small bounce is getting sold off

There was selling pressure across the Street as all sectoral indices ended in the negative territory.

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Last Updated: Apr 01, 2020, 05.50 PM IST
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There was selling pressure across the Street as all sectoral indices ended in the negative territory.
By Chandan Taparia

Nifty opened on a flat note on Wednesday, but then it started correcting right from the ‘word go’. The index continued to make lower lows for most part of the session and tested the 8,200 mark in intraday trade. Eventually, it concluded the session around the 8,250 mark and formed a Bearish Candle on the daily scale.

There was selling pressure across the Street as all sectoral indices ended in the negative territory. IT and banking heavyweights led the fall. At the current juncture, Nifty’s weekly setup is negative and small bounces are getting sold off quickly. Traders should refrain from taking long positions. Going forward, Nifty has resistance placed at 8,555 and 8,888 levels, while supports are placed at 8,000 and 7,700.

On the monthly options front, maximum Call open interest was place at 9,000 and then 10,000 levels, while maximum Put open interest was at 8,000 and then 7,500 levels. We haven’t seen any noticeable activity in Call Options, while open interest build-up was seen in Put options at 7,500 and 7,000. Options data indicated an immediate trading range between 7,500 and 9,000 levels.

India VIX fell 6.03 per cent to 60.52 level. VIX is cooling down from higher levels, which may provide some stability. At the same time, supply is visible at higher levels.

Bank Nifty underperformed the benchmark index for the third consecutive session and fell 4.89%. After an Inside Bar formation on Tuesday, the banking index breached the low of last two sessions and fell sharply towards the 18,000 mark. It formed a bearish candle on the daily chart, which resembled a Bearish Belt Hold pattern.

At its current juncture, the index is hovering around the 61.80% retracement level of the recent bounce from 16,116 to 21,462 level. If Nifty breaks and sustains below the 18,000 mark, then we may see further correction towards 17,000 and 16,600 levels. On the flipside, Bank Nifty has resistance placed at 19,200 and 20,000 levels. Till the time, Bank Nifty sustains below 18,700 level, the bears will have an upper hand and we may see selling pressure on any bounceback.

Nifty futures closed negative at 8,260 level with a loss of 4.19 per cent. There was marginal long build-up in Biocon, M&M Fin, Godrej CP and Hero MotoCorp while good amount of shorts were seen in Jindal Steel, Kotak Bank, TVS Motor, Cummins, Shriram Transport Finance.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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