The Nifty index had a highly volatile week as it started Monday (January 6) on a negative note due to geopolitical concerns, but recovered well over the past three sessions to reclaim new lifetime highs.
It respected to key support of 11,900-11,935 zones along with the 50 DEMA on a daily scale. The price setup suggests that declines are being bought and the market base is gradually shifting higher which could drive next leg of the rally.
The Nifty index opened positive on January 10 and extended its gains to make a new lifetime high of 12,311 mark. However, index witnessed some profit booking from higher levels and formed a Long Legged Candle on daily scale as it traded in wider range of 100 points. It formed a Bullish Candle on weekly scale with long lower shadow which indicates that declines are being bought in the market.
The overall trend of the market is positive and supports are again gradually shifting higher. Now, it has to continue to hold above 12,150 levels to start fresh leg of the rally towards 12,400-12,500 zones while on the downside major support is placed at 12,050 zones.
India VIX moved up by 10.87 percent from 12.70 to 14.08 levels on a weekly basis. Cool of in VIX from higher levels from 16.39 marks, has provided some comfort to the Bulls but overall comparatively higher VIX could keep the volatile swings in the market in the near term. VIX has recently bottomed out near to 10-11 zones and holding higher which may head towards 17-18 zones ahead of Budget 2020.
On the options front, maximum Put OI is at 12,000 followed by 11,500 strike, while maximum Call OI is at 12,500 followed by 12,400 strike. We have seen Call writing at 12,600 followed by 12,500 strike while Put Writing is seen at 12,300 then 12,200 strike. Options data indicates a trading between 12,000-12,400 zones.
Bank Nifty opened on a positive note and moved towards 32,350 levels, but remained volatile in a wider trading range of 400 points for the most part of the session. It formed a Small bodied Candle on a daily scale while Hammer kind of candle on the weekly chart, which implies that decline is being bought. Now it has to hold above 31,750 zones to witness an up move towards its lifetime high of 32,500- 32,600 zones; while on the downside major supports are seen at 31,500 then 31,250 levels.
Bank Nifty managed to hold its key positional support of 30,800 zones and nearing to its new high territory which indicates that key support is ready to hold all kind of volatility and profit booking declines.
Stock specific positive view in UltraTech Cement and other cement companies, Asian Paint, Tata Motors, Tata Global, Dabur, HUL, Escorts etc while weakness in PEL, ZEEL, Yes Bank and IndusInd Bank.
The Author is Derivatives & Technical Analyst at Motilal Oswal.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.