On the weekly chart, the Nifty 50 index formed a bearish candle last week and remained restricted inside preceding week’s High-Low variety indicating lack of strength on either side. The index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating positive bias. The chart pattern suggests that if Nifty crosses and sustains above 17800 levels it would witness shopping for which would lead the index towards 18000-18300 levels. However, if the index breaks under 17300 level it would witness promoting which would take the index towards 17100-16800.
On the day-to-day chart, Nifty has closed under its 20 day SMAs indicating unfavorable bias in the brief term. Nifty continues to stay in an uptrend in the medium term, so shopping for on dips continues to be our preferred technique. For the week, we count on Nifty to trade in the variety of 18000-17300 with mixed bias.
The weekly strength indicator RSI and momentum oscillator Stochastic have each turned unfavorable and are under their respective reference lines indicating unfavorable bias.
Nifty Derivative Outlook
Nifty concluded September expiry on a decrease note at 75% compared to 84% in August, shedding about 9 lakh shares in OI indicating some profit booking at larger levels. In Bank Nifty September rolls have been marginally larger at 81% vis-a-vis 79% of August expiry adding 6.40 lakh shares in OI. India Vix, indicator of market place volatility, has moved up from its current decrease levels of 11-13 to presently at 17.21 suggesting a sense of apprehension as Nifty faced profit booking at larger levels having said that as ease off from present levels will augment for an up move in Nifty. Nifty on Friday in October series closed with a reduce of 93 points (-.53%) & OI addition of 3.66 lakh (3.14%) shares in OI indicating Short Build up, even though Bank Nifty witnessed Long Unwinding with cost reduce of 263 points(-.70) with OI shedding of .70 lakh (-3.36%) shares.
Option Data shows Nifty in weekly expiry scheduled on 7th October has highest OI on the Get in touch with side at 18,000(42.11L) & 17,700(36.34L) strikes respectively wherein writing of 18.40 lakh shares & 12.86 lakh shares was witnessed at 18,000 & 17,600 strikes respectively, indicating powerful resistance zone at 17,700 – 18,000, even though on the Place side highest OI is at 17,400(29.16L) & 17,000(26.44L) strikes wherein writing of 19.96 lakh & 11.78 lakh shares have been seen indicating a powerful assistance zone. Nifty 17,500 is most likely to act as a critical pivotal as each Call & Put have seen addition of 18.25 & 10.89 Lakh shares in OI.
Bank Nifty Outlook
On the weekly chart the index has formed a bearish candle carrying either side shadows representing intense volatility on either side. The index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating sustained up trend on lengthy term charts. The chart pattern suggests that if Bank Nifty crosses and sustains above 38000 levels it would witness shopping for which would lead the index towards 38300-38600 levels. However if the index breaks under 36800 level it would witness promoting which would take the index towards 36200-36000. Bank Nifty is trading above 20, 50, and one hundred day SMAs which are significant brief term moving averages, indicating positive bias in the brief to medium term. Bank Nifty continues to stay in an uptrend in the medium term, so shopping for on dips continues to be our preferred technique. For the week, we count on Bank Nifty to trade in the variety of 38300-36500 with a mixed bias.
The weekly strength indicator RSI and momentum oscillator Stochastic have each turned unfavorable and are under their respective reference lines indicating unfavorable bias.
Bank Nifty Derivative Outlook
In Bank Nifty the highest OI on the Get in touch with side in the weekly expiry on 7th October is at 38,000(15.16L), 37,500 ( 10.85L) & 38,500(9.70L) strike even though on the Place side highest OI is at 37,000(10.97L) & 36,000(7.80) strike, with 37,000 acting as a pivotal level for the expiry as there has been addition of 4.84 lakh shares on Get in touch with side & 6 lakh addition on Place side suggesting that any sustain move on either side of this level will determine the trend in Bank Nifty. While on the writing front 38,000 Call has seen writing of 4.83 lakh shares followed by 38,500 Call writing 4.37 lakh shares indicating a powerful resistance zone, even though powerful assistance will be seen at 36400 & 36000 as Put writers have been active at this strike.
Nifty 50 technique for this week
Traders can initiate a Moderately Bullish technique with decreased premium outflow & decrease breakeven point known as BULL Get in touch with SPREAD for 7th October Expiry wherein trader will invest in one lot of 17,600 contact strike @ 91 and simultaneously sell one lot of 17,850 contact strike @ 26, so that net outflow or maximum loss will be restricted to upto Rs 3,250. On expiry day, if Nifty closes above 17,665 the technique will start out creating profit, having said that as the danger is restricted so is the profit also restricted. The maximum gains will be restricted up to Rs 9,250 only mainly because the gains of a lengthy 17,600 strike contact will be offset by the sold 17,850 strike contact if Nifty closes above 17,850 on expiry.
Sectors, stocks to watch this week
We count on energy, telecom, cement, banking, economic and automobiles to do nicely in the close to term. Stocks such as United Spirits, Sun Pharmaceuticals, NTPC, Reliance Industries Ltd, Bharti Airtel, Canara Bank, LIC Housing, Tata Motors, Finpipe, Ambuja Cement can do nicely .
(Rajesh Palviya, VP– Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s personal.)