Motilal Oswal Securities
The Nifty continued to trade weak for the third consecutive session and corrected from its swing high of 10,774 to 10,500 levels. It has been touching lower highs-lower lows for the third consecutive session and formed a Bearish candle on the daily as well as weekly scale. It is trading below its 50-day daily exponential moving average and crucial level of 10,650, which is also a trend line formed by connecting its recent swing lows of 10,020, 10,105, 10,440 and 10,650 levels.
Till it remains below the 10,650 zone, the index is likely to trade rangebound with limited upside. On the downside, the next major support exists at 10,450 and 10,333 levels.
The Nifty started the weak on a positive note, but fell sharply in the last three sessions in the truncated week to drift towards 10,500 levels. India VIX moved up 4.41 percent to 19.16 levels last week. The higher volatility is keeping its upside restricted.
If VIX crosses and holds above the 20-21 zone, then the bears may attack again, while bulls require stability below 17-16 zones to get a smooth ride.
On the option front, maximum put open interest (OI) stands at 10,000, followed by 10,500 strikes. Maximum call OI is seen at 10,700, followed by 11,000 strikes. Call writing is seen at 10,600 and 10,700 strikes, whereas put unwinding is seen at all immediate strike prices. Option band signifies an immediate trading range between 10,400 and 10,700 zones. Aggregate put-call ratio fell from 1.73 to 1.46 levels in the last four sessions, with the rise in volatility suggesting limited upside.
The Bank Nifty failed to cross the previous day’s high of 26,350 and corrected towards 25,950 levels after its initial rangebound move on Thursday. It formed a bearish candle on the daily scale and a Bearish Belt Hold candle on the weekly scale. It broken its immediate support of 26,100. The next support zone at 25,800-25,750 could be respected, while on the upside, the immediate hurdle exists at 26,250-26,333 levels.
Stock-wise, we are positive on Dabur, Marico, Zee Entertainment Enterprises, Maruti Suzuki, Larsen & Toubro (L&T) and Dr Reddy's Laboratories. We remain negative on Mahindra & Mahindra (M&M), metals and selective public and private Banks.
We are heading towards the November series expiry week and the index is now near its volume weighted average price (VWAP) zone. After the decline from higher levels, it could see some time or price consolidation amid higher volatility.
The author is a Derivative and Technical Analyst at Motilal Oswal Securities.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.