F&O: Nifty tech indicators have no signs of early trend reversal

By Chandan Taparia

Nifty opened on a positive note on Friday, but the bears took the gap-up opening as a shorting opportunity and started dragging the index lower from the very start of the session. It continued to make lower lows for most part of the session and fell towards the 8,055 level. The fall was majorly led by banking, IT and auto heavyweights. Eventually, the index concluded the session a tad below the 8,100 mark and formed a bearish candle on the daily scale.

Nifty concluded the week with a 6.66% loss and formed a bearish candle on the weekly scale. However, it moved within the penultimate week’s trading territory, and thus formed a Harami pattern on the weekly scale. The RSI oscillator is also moving southward on the weekly and monthly charts, and yet it is not showing any sign of trend reversal.

At its current juncture, Nifty’s weekly setup is negative and small bounces are getting sold off quickly as it is making lower highs from last seven consecutive weeks. Thus, traders should refrain taking long positions. Going forward, resistance for Nifty is placed at 8,350 and 8,555 levels, while support is now placed at 7,700 and 7,500 levels.

On the monthly options front, maximum Call open interest was seen at 9,000 and then 1,0000 levels, while maximum Put OI stood at 8,000 and then 7,500 levels. No noticeable activity was seen in Call and Put options. Options data indicated Nifty’s immediate trading range between 7,500 and 8,500 levels.

India VIX fell 7.91 per cent to 55.30 level. VIX is cooling down from higher levels, which may provide some stability. At the same time, the trend is under pressure and supply is visible at higher levels.

Bank Nifty continued its underperformance against the benchmark index for the fourth consecutive session and fell 5.27%. It is making lower highs for the past four consecutive session and fell sharply towards the 17,150 level. The index formed a bearish candle on the daily chart, which resembled a Bearish Belt Hold pattern.

The banking index breached its support at the 61.80% retracement level of the recent move from 16,116 to 21,462 level. It ended the week with massive loss of 13.62 per cent and formed a big bearish candle on the weekly chart. Till the time, Bank Nifty sustains below 18,000 level, the bears will have an upper hand and we may see selling pressure on every bounceback. The 18,000-18,700 zone would now be seen as key resistance, while support is placed around 16,000 level.

Nifty futures closed negative at 8,109 level with a loss of 1.80 per cent. There was marginal long build-up in Apollo Hospitals, Cipla, Torrent Pharma, Biocon and Lupin while good amount of shorts buildup was seen in Jindal Steel, Shriram Transport Finance, MFSL, RBL Bank and ICICI 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)