Moneycontrol PRO

Technical View | Nifty forms bearish candle but defends 17,000 mark; volatility seen ahead of F&O expiry

Since expiry sessions are marked with unusual volatility, Mazhar Mohammad advises traders to remain neutral on the index.

February 23, 2022 / 05:02 PM IST

The Nifty50 on February 23 failed to hold on to gains due to selling pressure in late trade, forming a bearish candle on the daily charts. But it managed to defend the 17,000 mark, ahead of the expiry of February futures and options contracts. Geopolitical tensions and high oil prices weighed on the market sentiment.

The bearish candle formation appears when the closing was lower than opening levels. Experts expect the volatility to continue and if the index breaks the crucial 17,000 mark, it could move down further towards the 200-day moving average which is placed at 16,888.

The volatility remained on the higher side, though it cooled down significantly, indicating a roller coaster ride favouring bears in coming sessions. India VIX, which measures the expected volatility in the market, declined 7.94 percent to 24.54 levels.

Also read - Brent crude may top $115, this year will be tough for investors, says Atul Suri

The Nifty50 after a five-day correction attempted to claw back by opening higher at 17,194.50 and jumped to 17,221, but lack of follow-up buying and profit booking at higher levels pulled down the index near the 17,000 mark in late trade. The index finally settled at 17,063, down 29 points, continuing a downtrend for the sixth consecutive session.

Close

"Despite a strong opening, bulls failed to hold on to the strong gap-up opening as bears dominated by the end of the day which resulted in a bearish candle. Nevertheless, as markets are in a bear grip, volatility is likely to continue even in the next trading session on which monthly expiry is scheduled," says Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

According to him, if the Nifty slips below 17,000 levels in the next session, weakness may extend into the zone of 16,900– 16,840 levels. Contrary to this, "if the Nifty sustains above 17,220 levels then strength shall expand into the zone of 17,300–17,350 levels," he says.

Also read - Expect rupee at 80 a dollar, 10-year bond yield at 7.75-7.50%, says Dhananjay Sinha of JM Financial

Considering the fact that the expiry sessions are marked with unusual volatility, Mazhar Mohammad advised traders to remain neutral on the index.

On the option front, there was maximum Call open interest at 17,500 and 18,000 strike while maximum Put open interest was seen at 16,500 and 1,7000 strike. Call writing was seen at 17,200 and 17,400 strike while Put writing was seen at 16,500 and 16,800 strike. Option data indicated that the Nifty50 could trade in a range of 16,800 to 17,300 levels in coming trading sessions.

Positive setup was seen in Bandhan Bank, Biocon, Bank of Baroda, Kotak Mahindra Bank, United Spirits, Titan Company, Cummins India, Federal Bank, Tata Consumer Products, Infosys and Maruti Suzuki, says Chandan Taparia, Vice President, Analyst-Derivatives at Motilal Oswal Financial Services.

Also read - Gainers & Losers: 5 stocks that moved the most on February 23

However, weakness was seen in Gujarat Gas, ONGC, Indiabulls Housing Finance, Ambuja Cements, MCX, Granules India LIC Housing Finance Dabur, L&T and ICICI Bank, he adds.

Bank Nifty also opened positive at 37,628 but failed to hold its 50-day exponential moving average (37,667) and a key hurdle of 37,777. After trading in a consolidated range of 300-400 points, the index finally closed at 37,392, up 20.40 points.

"Now till Bank Nifty remains below 37,750, a bounce could be sold for a downside support towards 37,000 and 36,750 levels whereas hurdles are seen at 37,750 and 38,000 levels," Chandan Taparia says.

The broader markets outperformed frontliners as well as Bank Nifty, after a sharp correction in the previous few sessions. The Nifty Midcap 100 index was up 0.6 percent and Smallcap 100 index gained 1.16 percent.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Feb 23, 2022 05:02 pm
Sections
ISO 27001 - BSI Assurance Mark