Weekly expiry 14,400-14,500 key levels to watch out for; will 14,500 Call writers throw in the towel?
Update: Indian markets have recovered smartly from the lower levels with Nifty reclaiming its 14,500 mark. The zone of 14,400-14,500 is very crucial for the index as at 14,400 Put option, we have seen the addition of nearly 36 shares in today’s trading session. With this, the total open interest concertation at 14,400 Put option stands at nearly 57 lakhs. Besides, the 14,500 Call Option has seen the addition of nearly 40 lakh shares in today’s trading session itself. Hence, if the index continues to stay above the 14,500 level for some time, it could create jitters among the 14,500 Call writers and some short covering would be seen.
Among the sectoral indices, Nifty Metal, Nifty Pharma, and Nifty Bank were the top gainers, gaining more than 1 per cent each. Nifty Bank has seen good action on the buying side in the last hour or so.
The shares of sugar companies are seen buzzing on the bourses in otherwise a fragile market. Balrampur Chini Mills has jumped over 8 per cent on the back of a huge surge in volumes.
Other sugar stocks namely Dalmia Bharat Sugar, Uttam Sugar, Dhampur Sugar Mills, Triveni Engineering and Dwarikesh Sugar rallied in the range of 4.5 per cent to 8 per cent.
In comparison, BSE Sensex is down by 0.65 per cent while Nifty has slipped below the 14,450 mark.
The Indian markets have slipped into negative terrain after opening higher as profit booking emerged amid India reporting over 2 lakh Coronavirus cases in a day, which is a record high. The advance-decline ratio is tilted in favour of decliners.
Among the sectoral indices, the majority of the sectoral indices were trading in red with Nifty Auto and Nifty Realty being the top losers. On the other hand, Nifty Pharma and Nifty Metal emerged as the top gainers. The majority of the components of Nifty Pharma were trading in green with Cipla leading from the front as it has gained over 3.5 per cent.
On the options' front, Call addition in Nifty is seen in a broad range of 14,500-14,600. The 14,600 Call option has added over 22 lakh open interest in the initial hour of trade while the 14,500 Call option added over 12 lakh open interest.
Nifty started off Tuesday’s trading session on a positive note and soon, approached the level of 14,450 in the first hour of the trade. We had mentioned in our last write-up that the zone of 14,450-14,470 would act as a resistance zone and in line with our expectation, Nifty resisted around this zone. After facing resistance around this zone, Nifty pared the bulk of its gains and sneaked below the 14,300 level amid profit-taking in the IT majors post TCS results. However, in the second half of the trading session, bulls staged a smart rebound and closed above the level of 14,500, aided by brilliant performance shown by auto, banking, and select metal stocks.
As we had predicted that Nifty could form an inside bar post the formation of a large size bearish bar, it indeed formed an inside bar as the price traded within the range of the prior bar and in candlestick terms, it resembles a bullish harami pattern. This is the sixth instance where Nifty has formed an inside bar since February 16 high. In the past, every time when it formed an inside bar, the bullish move had continued for the next couple of days. If the history repeats itself, then it’s likely that Nifty may continue its upmove for a day or two and with this, it can fill its opening downside gap of April 12, which is placed in the region of 14,652-14785. At the current juncture, we do not foresee a move beyond this region as the index is trading below its important short-term moving averages while Tuesday’s move was due to short covering.
The 14-period RSI has rebounded from 40 levels and settled at the 45.12 mark. On Tuesday, it stood neutral and did not show a divergence against the price while the daily MACD was bearish and stayed below the signal line. One interesting observation on the ADX indicator was that the ADX did not cross the threshold limit of 25, which generally indicates strength in the trend. With no decisive strength in the trend seen on ADX and no follow-through selling witnessed, we anticipate the index may continue to trade in a broad range. Having said that, the level of 100-DMA is a crucial support and as long as the index trades above this level, bulls stand a chance to rejoice.