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F&O: RSI signals strong bear grip; VIX hits a 11-year high

On the options front, maximum Call open interest was at 12,000 and then 10,000 levels.

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Last Updated: Mar 24, 2020, 06.16 PM IST
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India VIX moved up 16.15 per cent to 83.60 level. VIX made a high of 86.63 during the day.
By Chandan Taparia

Nifty50 opened on a positive note on Tuesday on the back of a recovery in global markets. It then corrected sharply towards the 7,500 mark in the initial hours of trade before rebounding piercingly in the second half and moving towards the 8,000 mark.

Eventually, it concluded the session near the 7,800 mark, and formed a Doji kind of candle on the daily chart, indicating indecisiveness among the market participants.

The RSI oscillator is showing a positive divergence on the daily scale, but there is still no sign of a trend reversal on the price front. At the current juncture, the market is in strong bear grip and is, thus, not respecting any support levels. As of now, there is no sign of trend reversal and traders should refrain from bottom fishing. Going forward, Nifty resistance levels are going to shift lower to 8,200 and 8,555 levels while major supports are now placed at 7,500 and then the 7,200-6,800 zone.

On the options front, maximum Call open interest was at 12,000 and then 10,000 levels while maximum Put OI was at 7,000 and then strike price 7,500. Options OI data lay scattered at various strike prices as many Put writers got trapped in the recent market fall. Even unwinding pressure kept the Street under pressure. Marginal Call writing was seen at strike prices 8,300 and 8,400 while there was Put writing at 7,000 and 7,800 levels. Options data indicated a wider trading range between 7,500 and 8,300 levels.

India VIX moved up 16.15 per cent to 83.60 level. VIX made a high of 86.63 during the day, and it’s now near the 2009 high of 87.53 and 2008 high of 92.53 levels. Higher VIX indicates that the bear grip and volatile swing could continue in the market. Nifty’s intraday movement of 500-600 points swing could now be the new normal in such a situation till volatility cools down from its 11-year high levels.

Bank Nifty continued its underperformance for the third consecutive session as it moved up comparatively less than the benchmark index. The banking index has seen a decent recovery from lower levels and, thus, formed a Hammer kind of candle on the daily chart. For the second consecutive session, Bank Nifty closed below its support of 78.60% retracement level (17517) of its previous rally from 13,407 to 32,613 levels and yet there was no sign of a trend reversal in the index.

Looking at the current scenario, traders are advised to remain light on positions, as the ongoing correction may continue towards the 16,000 – 15,500 levels. On the flip side, resistance is placed in the 18,300-19,000 zone.

Nifty futures closed positive at 7,910 level with a 4.34 per cent gain. We witnessed long buildup in stocks like HDFC Life, Infosys, Bajaj Finance, Hindustan Unilever and Escorts while shorts build-up was seen in Century Textiles, Concor, M&M, Grasim and IndusInd Bank.

(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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