F&O Manual | Indices range-bound; Nifty resistance at 22,200-22,300 but charts show bullish patterns

A pullback rally for Bank Nifty will face resistance at 48,000-48,100 area, from where another round of sell-off is likely, said experts

The Indian benchmark indices were trading range-bound amid volatility on May 14. NSE Nifty 50 was trading up 40 points at about 22,140 levels at 10.45 am, with technical charts showing long buildup and bullish signals.

The Nifty option chain shows resistance at 22,250/ 22,300 zone. If these levels are surpassed, then the index could rise to test 22,600. Options data also shows a tussle between call and put option writers forming key straddle positions at 22,100 and 22,200.

Bars in red indicate the change in open interest (OI) of call writers, while the green bars show the change in OI of put writers

SBI Securities sees limited downside on Nifty. “Among the momentum indicators, the daily stochastic has given a bullish crossover, suggesting limited downside for now. The derivative data also supports the overall bullish chart structure,” said Sudeep Shah, DVP and Head of Derivative and Technical Research.

Shah noted the long buildup in Nifty derivatives: The May future has surged by 0.27 percent, while the cumulative OI of the current, next, and far series has surged by 3.16 percent. “Going ahead, for the day, the zone of 22,050-22,080 will act as a crucial support for the index,” he said.

As long as this support zone holds, the index is likely to test 22,220, and then 22,310 -- its 50 and 20 DEMA, respectively.

On the downside, if the index slips below 22,050, the next support is at 21,940-21,880, said Shah.

JM Financial: “A bullish engulfing pattern formed on daily charts -- positive; immediate resistance at 22,200 followed by 22,300. On a decisive close above 22,300, Nifty will resume the uptrend to re-test 22,750-800 area. Immediate trading support stands at 21,950/ 21,800. Declines close to 21,850-21,900 can be used as a buying opportunity with a stop loss of 21,700.”

Bank Nifty technical view

SBI Securities: “On a daily scale, Bank Nifty has formed a bullish candle with a lower shadow, which indicates buying interest at lower levels. For the day, the zone of 48,050-48,100 will act as a crucial hurdle for the index. Any sustainable move above the level of 48,100 will lead to a sharp upside rally up to the level of 48,450, followed by 48,700 levels. On the downside, the zone of 47,650-47,600 will act as immediate support for the index," said Shah.

Also read: Option strategy of the day | Long build up in Dr Lal Path labs; Buy call option for upside

JM Financial: "A pullback rally for Bank Nifty will face resistance at 48,000-48,100 area, from where another round of sell-off is likely.” The brokerage suggests taking fresh positional longs only above 48,300. Immediate support is at 47,400/ 47,200.

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.