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    F&O: As Nifty50 consolidates, Bank Nifty signals trend reversal ahead

    Synopsis

    Nifty has to hold above 10,700 level to extend its move towards 11,000, while key support exists at 10,650 and then 10,550 levels.

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    Bank Nifty has been underperforming Nifty since last two sessions. It has seen some shorts buildup in the futures segment.
    By Chandan Taparia

    Nifty opened positive and headed towards the 10,900 level on Monday, but followup buying was missing due to the underperformance of the banking stocks. The index closed positive with around 35 points gains, but formed a bearish candle, as it closed lower than its opening level.

    The index consolidated between 10,680 and 10,850 levels for the entire week but follow-up has been missing even after surpassing the 10,850 level. The index has been respecting its rising support trend line by connecting all the recent swing low at 7,511, 9,004, 9,544, 9,845, 10,250, 10,300 and now 10,650-10,700 zones, and needs to hold the same for investors continue the ‘buy on decline’ strategy.

    Nifty has to hold above 10,700 level to extend its move towards 11,000, while key support exists at 10,650 and then 10,550 levels.

    India VIX moved up 1.02 per cent to 25.19 level. The overall lower volatility suggests a bullish stance of the market with a ‘buy on decline’ strategy.

    On the options front, maximum Put open interest stood at 10,000 level followed by 9,000, while maximum Call open interest stood at 11,500 followed by 11,000 levels. There was Call writing at strike prices 10,900 and 11,000, while Put writing was seen at 10,800 and then 10,400 levels. Options data suggested a wider trading range between 10,500 and 11,200 levels, while the immediate trading range stood between 10,600 and 11,000 levels.

    Bank Nifty has been underperforming Nifty since last two sessions. It has seen some shorts buildup in the futures segment. It has seen a breakdown from the Rising Wedge pattern on the daily chart, and is sustaining well below the breakdown levels. The index witnessed the formation of a Bearish AB=CD pattern on the daily chart of Bank Nifty and Nifty Private Banking index, indicating the possibility of a trend reversal in the coming days.

    The RSI oscillator has seen a breakdown on the daily chart, which doesn’t bode well for the bulls. The banking heavyweights have started correcting from higher levels and started showing initial signs of weakness. Now a hold below 22,500 level can trigger a decline due to profit booking towards 22,000 and then 21,750 levels, while on the upside, a key hurdle exists in the 22,750-23,000 zone.

    Nifty futures closed positive at 10,814 level with 0.45 per cent gains. Positive trade setup was seen in stocks like Ramco Cement, Hindalco, HCL Tech, RIL, ACC, Colgate-Palmolive, Wipro, Bharti Airtel, Infosys, Dabur, HUL and Sun Pharma while the structures looked weak in Bank of Baroda, PowerGrid, Federal Bank, RBL Bank, GAIL, Canara Bank, PNB, L&T Finance and Bata India.

    (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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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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