F&O Manual: More sellers than buyers in range-bound market; opportunity in PNB, NMDC

Massive earnings beat by IT firms Infosys and HCL, too, failed to provide the needed impetus to the market, as the Nifty slipped further lower on January 13. In the morning trade, the index was down 60 points and slipped below the support level of 17,800 and futures also declined 0.2 percent.

Most traders were maintaining their short position with strict stop losses amid complaints that the intraday volatility was becoming a problem.

Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.

Ankush Bajaj, a Chhattisgarh-based trader, said he is short on the Nifty but long on the Bank Nifty. Non-directional trade continues in the algo he has deployed.

On the Nifty weekly options, 18,000 strikes saw the biggest call writing followed by 17,900. Both of them will act as resistance during the week. Put writers adjusted their positions lower to 17,700, which is emerging as fresh support for the index.

Rajesh Sriwastava, another derivative trader, said he is also short on the Nifty with stop loss at 17,950. He said there are just six buyers in the market for every 10 sellers, which is putting pressure on the market.

Barring metals, which saw a bullish setup and media that saw short covering, all sectors saw short buildup, a phenomenon when open interest rises but prices fall. Capital goods and technology stocks were under heavy pressure.

A short buildup was also seen in L&T Tech Services, Motherson Samvardhana, Bata India, Gujarat Gas, Aurobindo Pharma and Coforge among others. A long buildup, when price and OI go up in tandem, was seen in MCX and Chola Finance among others.

Manish Shah, a trader and a technical analyst, doesn’t see any trend emerging in the market. Though, he sees some trading opportunities. Shah is a buyer of NMDC, with the target at Rs 133, and Punjab National Bank (PNB) with target at Rs 59.

Disclaimer: Trading in futures and options markets is extremely risky. Traders and experts mentioned above may not be SEBI registered. Hence, trades they have taken should not be construed as investment or trading advice. Please consult a financial adviser before taking any trades.