F&O Manual | Summit 17,600 emerges as Nifty battle zone as setup remains weak

The market set-up remained weak for another day as bears continued to rule the roost on January 31. Traders also maintained their short position as the Nifty traded down 0.5 percent to 17,561.15. Nifty futures were also down by the same quantum to 17,646.

On the options front, 17,600 was the battle zone with maximum call and put writing happening at that strike. Call writing was also seen at 17,700 and 17,800 strikes as bears are creating fresh hurdles.

The bars reflect changes in OI during the day. The red bars show call option OI and the green put option OI.

“I have a short position on the Nifty as per my system,” said Ankush Bajaj, a Chhattisgarh-based trader who uses an algorithm-based trading system. He added that he sees some pullback in Bank Nifty and has squared off the short position and taken long positions.

Sector wise, technology and FMCG saw short buildup. 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. On the other hand, auto, chemicals, cement, power and oil and gas were those that saw long build up. A long build-up is a bullish sign that happens when open interest and volume increase with the rise in share price.

Traders and analysts have been advising to stay on the sidelines rather than take intraday trades in individual stocks as there is high volatility.

Indus Towers, REC, Samvardhana Motherson, IDFC and Bharat Petroleum saw long buildup. Adani Enterprises, which has been under intense scrutiny in recent days, also saw a long build-up.

Tech Mahindra, which released its earnings on January 30, saw short buildup. Britannia, HDFC Life Insurance, Laurus Labs and Bajaj Finance were others that also saw short buildup.

Seema Jain, a trader and a Sebi-registered analyst, said Maruti Suzuki is a good buy above Rs 8,940. She added Polycab India is also a buy above Rs 2,882.

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