The index got stuck in a broader trading range between 10,550 and 10,880 and requires a decisive range breakout to commence the next leg of rally, says Chandan Taparia of Motilal Oswal Financial Services.
Chandan TapariaMotilal Oswal Financial Services
The Nifty witnessed buying interest in the second half of its last trading session (December 7) to settle near 10,700. It managed to respect its December 6 low and formed a Hammer candle on the daily scale. Multiple hurdles at higher levels are restricting its upside momentum.
Now, it has to hold its immediate support of 10,650 to extend its gains towards 10,777 and 10,850 levels. On the downside, crucial support is seen at 10,600, then 10,550 levels.
The index got stuck in a broader trading range between 10,550 and 10,880 and requires a decisive range breakout to commence the next leg of rally.
It saw volatile swings last week, in line with the global cues and Monetary Policy Committee meet last week. Bulls and bears both are fighting hard to emerge from this trading range, with dips being bought and bounces being sold into.
India VIX fell 3.37 percent to 18.65 levels. Volatility is showing no signs of cooling down and higher VIX suggests more volatile swings in coming sessions.
On the option front, maximum Put OI is seen at 10,000, followed by 10,200 strikes. Maximum Call OI is seen at 11,000 and 11,500 strikes. Call writing is seen at 11,200, followed by 11,100 strikes, while Put writing is seen at 10,500 and 10,600 strikes. Option band signifies a broader trading range in between 10,550 to 10,850 zone.
The Bank Nifty managed to recover its previous day’s losses and saw buying interest on December 7 led by strong momentum in Kotak Mahindra Bank. It negated its lower highs-lower lows formation and moved up more than 400 points. It formed a Bullish Belt Hold on the daily scale, but multiple hurdles are seen at 26,850-27,000 levels, while support is intact at 26,000. Now, it has to surpass and hold above 26,666 to extend its gains towards 27,000 and then 27,250 levels. On the downside, supports are seen at 26,100-26,000 zone.
The market is likely to remain volatile, so we are advising traders to trade in Options till the market doesn’t smoothen out after the election results. Traders can opt for a Bear Put Spread if the index fails to hold 10,650 levels.
The author is Derivatives & Technical Analyst at Motilal Oswal Financial ServicesDisclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.