F&O Manual | Despite market rallying, a breakout is unlikely, say traders

The market remained buoyant for another day on January 18 as both domestic and foreign institutional investors took bullish trades boosting sentiments on the Street. The Nifty rose 64 points to 18,117.

On the weekly expiry day, 18,000 and 18,100 levels saw further Put accumulation as they are emerging as pillars of support for the market. Bulls have shifted their trades to 18,300.

However, traders and analysts still don’t see the market breaking out anytime soon.

“Market may remain choppy,” said Santosh Pasi, a trader and a Sebi registered investment advisor. “Traders should take non-directional trades.”

Non-directional trade refers to taking a similar position in both Put and Call options, which makes one leg profitable when the market moves one way and another leg in loss. The loss leg usually needs to be adjusted.

Bank Nifty, another index that is traded heavily, also rose 0.4 percent to 42,396.80. Buying was seen in private banking names while top government owned banks trades with marginal cuts.

Among other sectors, traders continue to be bearish on telecom stocks as they saw short buildup for another day. The short build-up is a bearish sign that takes place when the price of a stock falls, along with high open interest and volume.

Metals and textile saw long buildup. A long build-up is a bullish sign that happens when open interest and volume increase with the rise in share price.

Trent, Max Financial Services and Tata Steel were among the stocks that saw a long buildup. Manish Shah, a trader and technical analyst, said he was a buyer of Tata Steel today. Besides, he has also buy call on Balrampur Chini Mills.

Short buildup was seen in ICICI Lombard General Insurance, Adani Enterprises, City Union Bank and HDFC Life Insurance.

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