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Technical View: Nifty forms bearish candle on F&O expiry day; avoid fresh longs

Experts say traders should avoid fresh long exposure and those who are long, can hold positions with a stop loss below 11,498.

August 27, 2020 / 09:03 PM IST

The Nifty50 closed in the green for the fifth session in a row on August 27 but on the daily charts, it formed a bearish candle. Profit-booking at higher levels pushed the index below its opening level of 11,609.

The index reclaimed 11,600 in the opening trade to touch an intraday high of 11,617 before the bears pushed it lower. The index closed nine points higher at 11,559.

Experts are of the view that traders can avoid fresh long exposures and those who are long can hold positions with a stoploss below 11,498.

“Narrow trading ranges appear to have become the norm in the last couple of sessions. Hence, as long as the Nifty sustains above its 5-day exponential moving average, whose value is placed around 11498, one should look for targets placed around 11850 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

Close

If the Nifty trades below 11,558 in the next session, then it can witness selling pressure on an intraday basis, with initial targets placed around 11498. A close below its 5-Day EMA may extend the weakness towards 11,300, he said.

Traders should avoid fresh index exposure while existing long positions can be held with a stop below 11,498 on a closing basis and an initial target of 11,700, Mohammad said.

India VIX fell by 2.10 percent to 18.89 levels. Volatility is gradually cooling, which suggests a bullish stance and buy-on-decline strategy could continue.

Since it is the beginning of the September series, options data is scattered at various strikes. The maximum Put OI is placed at 11,000 followed by 11,500 strikes, while maximum Call OI is placed at 12000 followed by 11500 strikes.

“We have seen marginal Call writing in 11,600 and 11,800 strikes while Put writing is seen at 11,600 then 11,500 strikes. Options data suggests a positional wider trading range in between 11200 to 11800 zones,” Chandan Taparia of Motilal Oswal Financial Services Limited told Moneycontrol.

“The major trend of the index is positive and buying interest on declines could support it to commence the next leg of the rally.”

The Nifty has to hold above 11,450 zones to witness an upmove towards 11,750 while on the downside, the medium-term support shifts to 11,400-11,350 zones.

Disclaimer: The views and investment tips expressed by 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.
Kshitij Anand is the Editor Markets at Moneycontrol.
first published: Aug 27, 2020 04:54 pm

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