Stock Market

F O: Avoid long positions, use any bounce as a selling opportunity

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By Chandan TapariaNifty started Tuesday’s session on a positive note and moved towards the 9,400 mark in first half of the session.

However, it failed to sustain at higher levels and nosedived in the last hour of day.

As a result, the index trimmed all the intraday gains and fell by around 500 points from an intraday high of 9,403. Eventually, Nifty closed below its psychological support at the 9,000 mark for the first time in three years and formed a bearish candle on the daily chart. Despite the market being in the oversold territory, we are not seeing a sustainable bounce in the benchmark index, which is a negative sign for the market.

Considering the overall chart structure, traders should refrain from taking long positions, as all global markets are in strong bear grip.

Once can use any small bounce as a selling opportunity.

As long as Nifty doesn’t close above its previous day’s high, the bears will have an upper hand on the market.

At its current juncture, Nifty’s resistance levels have shifted lower to 9,400 and then 9,600 levels, while support is seen at 8,550. On the options front, maximum Call open interest stood at 12,000 and then 10,000 level while maximum Put OI was at 8,500 and then 9,000 levels.

Options open interest data lay scattered at various strike prices as many Put writers got trapped in the recent market fall.

Even unwinding pressure could keep the Street under the pressure.

Call writing was seen at strike prices 9,500 and 9,700 while there was Put writing at 8,100 and 8,500 levels, sliding lower day by day with lower market range.

Options data indicated a shift in the wider trading range to the 8,500-9,500 zone. India VIX closed 6.81% higher at 62.93 level.

A higher VIX beyond 50 level suggests volatile swings could continue in the market.

Volatility has to cool down from current multi-year high levels for stability to return and the market to see a smooth ride. Bank Nifty opened with marginal upside gap, but failed to sustain at higher levels as the bears turned aggressive from initial trades and continued to drag the index lower as the session progressed.

The banking index underperformed the benchmark index and formed a negative candle on the daily chart. It is sustaining well below its short-term and long-term moving averages on the daily chart and the RSI oscillator is not finding any ground.

At its current juncture, there is no sign of reversal on the charts and, thus, traders are advised to remain cautious and wait for some stability to emerge.

Going forward, Bank Nifty’s immediate resistance is placed at 23,500 and then 24,100 levels, while support can be seen around 21,300 and 20,500 levels. Nifty futures closed negative at 8,900 level with a loss of 2.40 per cent.

Some long buildup was seen in stocks like HPCL, Pidilite Industries, TVS Motor, HUL and Asian Paints, while there was shorts buildup in Zee Entertainment, Manappuram, Ujjivan, Muthoot Finance and UPL. (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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