Nifty started the April series on a positive note and moved towards 9,000 levels in initial trades.
However, it failed to sustain at higher levels then corrected sharply by more than 500 points from its intraday high.
It filled the opening gap and concluded the session with marginal gain and formed a red body candle on daily chart. Index made higher highs - higher lows for third consecutive session and continued its winning streak for fourth day in a row.
Nifty rebounded piercingly in last three sessions after the lower circuit on Monday and thus trimmed-off most of its intra-week losses. Index concluded the week with loss of around a percent and formed a bullish candle on weekly scale. It is forming lower highs - lower lows from last six consecutive weeks, which is a negative sign for the index.
Overall, chart structure is still negative but pull-back move of the ongoing corrective phase cannot be ruled out which could be sold again in line with the primary bearish trend. Till the time Nifty sustains above 8,300, we may see a bounce in index towards next resistance of 9,000 and then 9,200 zone, while a hold below 8,300 could fizzle out the pullback move to retest the swing low of 7,700 and 7,500 levels.
India VIX moved up by 4.90 percent from 67.10 to 70.39 levels on weekly closing basis. VIX has been moving upwards from last six consecutive weeks and during the last week it made high of 86.64 levels.
However, VIX corrected by 15 percent in last three sessions with the strong recovery in the market from lower levels. VIX has to cool down below 60-50 levels to get more stability with lesser swings going forward.
Since it is the beginning of new series so option data is scattered at various strikes. Maximum Call open interest was at 10,000 then 9,000 strike while maximum Put open interest was at 7,500 then 8,000 strike. Minor Call writing was seen at 9,500 followed by 10,000 strike while no major activity was seen on the Put side. Option data indicates a wider trading range in between 7,700 to 9,200 levels.
Bank Nifty continued its bounce back for fourth consecutive session and moved from 16,166 to 21,500 levels. However, during the session Bank Nifty witnessed a correction towards 19,600 despite the announcement of 75 bps repo cut by the Reserve Bank of India (RBI).
It made higher highs - higher lows for third session but formed a red body candle on daily chart as it corrected from opening levels. It formed a bullish body candle with big lower shadow on weekly scale but has been making lower top - lower bottom from last six weeks. RSI oscillator is also rebounding from oversold territory on daily scale and thus we may see some bounce back move.
However, higher degree chart structure is still under pressure and this bounce is just a pull-back move of broader correction which could be sold again at higher zones. Now Bank Nifty has to hold above 19,500 zone to witness a bounce towards 20,500 then 21,000 zone while support can be seen at 19,000 and then 18,300 levels.
Stock specific positive set up is seen in Hindustan Unilever, Colgate Palmolive, ITC a nd TCS whereas weakness is seen in most of the auto, metal and PSU banks. Index has seen recovery from lower levels due to government and RBI measures but now again it would move in line with the price behaviour of global market with concern over coronavirus. Traders are suggested to trade accordingly and stay light till volatility does not cool down significantly to get a smoother ride in the market.
(The author is Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.)Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.