F&O: Bears get upper hand; but cooling VIX signals consolidation


By Chandan Taparia

Nifty opened positive on Wednesday, but failed to hold above the 11,250 level and corrected towards 11,024 level. However, it witnessed a good recovery from lower levels. The bounces got sold into near the intraday hurdle at 11,250 level. The index continued its losing streak into the fifth consecutive session and made lower top and bottom on the daily scale before closing below its 50 DEMA. This gives an upper hand to the bears in this market.

The index formed a Bearish Belt Hold pattern as it made an opening high and remained under pressure at every small bounceback. As long as the index sustains below 11,250 level, the bounce could be sold into for further weakness towards 11,000 level, while on the upside, the medium-term hurdle has shifted lower to the 11,333-11,350 zone.

India VIX fell 1.96 per cent from 21.41 to 20.99 level. The cooling down of volatility despite the weakness in the market indicates a rangebound movement over the next few sessions with the upside capped.

On the options front, maximum Put open interest stood at 11,000 level followed by 10,500, while maximum Call OI was at 11,300 followed by 11,500. There was Call writing at 11,200 and then 11,300 levels, while Put writing was seen at 11,000 and then 10,950 levels. Options data suggested a trading range between 11,000 and 11,350 levels.

Bank Nifty continued its weakness for the fifth consecutive session and drifted towards the 20,800 level. The index formed a bearish candle on the daily scale and resistance levels have gradually shifted lower with the formation of lower top and bottom on the daily scale. It broke a key support at 21,000 level during the day, but managed to close above the same, thanks to some bounce in the last hour of the session. Now, a hold below 21,000 level could continue the weakness towards 20,800 and then 20,500 levels, while hurdles exist at 21,500 and 21,750 levels.

Nifty futures closed negative at 11,146 level with a loss of 0.14 per cent. The trade setup looked positive Tata Chemicals, Bata India, Ramco Cement, Apollo Hospital, VEDL and Escorts but it was weak seen in Bharti Infratel, Shriram Transport, LIC Housing Finance, ZEEL, Tata Steel, Motherson Sumi, IndusInd Bank, BHEL, Tata Consumer, Indiabulls Housing Finance, Marico and Bajaj 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)


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