F&O: Nifty forming lower highs and lows; market structure under stress

By Chandan Taparia

Nifty failed to surpass previous day’s high of 12,230 on Wednesday and continued its negative momentum for the third consecutive session by drifting below the 12,100 mark. The index has been witnessing sustained selling pressure for last three sessions and every small bounce is being sold into as the immediate structure has come under pressure.

The index formed a Bearish Candle on the daily scale, as the bears continued to dominate and resistances shifted lower gradually. Nifty corrected by around 330 points in last few sessions and now hovers near its 50 DEMA. It has been forming lower highs and lows since last two sessions and needs to negate the same to get short-term stability. As long as it holds below the 12,150 mark, Nifty could drift towards its previous gap area at 12,044, while hurdles are seen at 12,225 and then 12,250 levels.

On the options front, maximum Put open interest was at 12,000 followed by 11,500 levels, while maximum Call open interest was at 12,500 followed by 12,300 levels. There was good amount of Call writing in the 12,200 – 12,300 zone; while marginal Put writing was seen at 12,100 followed by 11,900 levels. Options data indicated a trading range between 12,000 and 12,500 levels.

India VIX moved up 3.15 per cent to 16.36 level. We are witnessing a spike in volatility due to the ongoing earnings season and the forthcoming Union Budget 2020

Bank Nifty has been making lower tops and bottoms and has broken it multiple support at 30,800 level. It has been underperforming Nifty for the past few sessions and the bears are holding a grip, as sustained selling pressure has emerged in the rate-sensitive index.

The index has broken and closed below its crucial multiple support at 30,800, which indicates an weakness and possible downside move towards 30,500 and then 30,300 levels, while resistances have shifted lower to 31,250 and then 31,500 levels.

Nifty futures closed negative at 12,149 with a loss of 0.44 per cent. There was long buildup in PFC, Grasim, ICICI Pru Life, ZEEL, NIIT Tech and Just Dial while shorts were seen in Oil India, ONGC, Coal India, NTPC and BEL.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)