The Nifty closed below the previous breakout levels of ‘Broadening’ pattern on the weekly chart, which is not a positive sign for the index, Rahul Sharma, Head – Technical & Derivatives Strategy at Centrum Broking Limited, said in an exclusive interview with Moneycontrol’s Kshitij Anand.
Q) How is market likely to pan out in December series?
A) The November series started on a positive note as a lot of long positions rolled from the October expiry. The bullish momentum of the penultimate month continued in starting sessions of the November expiry and as a result, the index made a new ‘all-time high’ of 10490.45.
But, foreign institutional investors (FIIs) didn’t participate in that up move as they started taking short positions in the index futures right from the start of the series.
They continued their selling momentum in index futures throughout the first fortnight of the November series and as a result, their ‘Long Short Ratio’ (LSR) in index futures too came down from 70.40 percent recorded on 26th October to 48.90 percent as on 16th November.
The Nifty50 failed to abide their selling pressure and corrected by around 400-points from its peak. Average of FIIs’ short positions in Nifty was around 10,370 – 10,420 and they defended that territory in the latter half of the November expiry when Nifty bounced back.
To get an exit with the profits, they didn’t give any chance to the Bulls on the expiry session and dragged the index lower below 10250 levels.
Rollovers in the Nifty (63.28%) was below its quarterly average of 66.84%. Also, rollovers were low in terms of open interest, indicating that the most of the positions formed in the last couple of months didn’t get carried forward to next series.
At the current juncture, 10000 put and 10500 call options are attracting trader’s attention and will remain a range for the index for few sessions.
Rollover in BANKNIFTY (55.62%) was much below its quarterly average of 67.18 percent. In November series, we witnessed a good amount of open interest reduction in the banking index and as a result, open positions (Open Interest) in Bank Nifty is at the lowest level of the three years.
It indicates that most of the long positions, formed in the recent up move, are now out of the system. Since Bank Nifty is light on positions; formation of new positions will dictate the further movement of the index.
At the current juncture, strong support for the banking index is placed in the zone of 24,800 – 25000 and a sustainable move below the same may not bode well for the Bulls as it will open a door for 24,000 mark. On the flipside, 25,800 – 26,000 will remain a strong hurdle for the Bulls.
Q) Any stocks which are looking attractive?
A) Stocks like Biocon, Hexaware, Voltas, PC Jeweller, Jain Irrigation, Tata Power, Tata Elxsi, SRF and Dalmia Bharat added good amount of longs in November series and the same got rolled to the December series. These stocks can be traded with a positive bias.
Q) How is market looking on the monthly and weekly charts?
A) The Nifty has formed a small body red candle on the monthly chart and is not showing any significant reversal signs. While, with the biggest weekly loss in last fifteen weeks, the index made a big bearish candle on the weekly chart.
Due to correction of last two sessions, the Nifty closed below the previous breakout levels of ‘Broadening’ pattern on the weekly chart, which is not a positive sign for the index.
Currently, the Nifty is forming a Bullish Harmonic pattern called ‘Bullish AB=CD’ pattern on the daily chart and the reversal zone of the same is placed around 10,000 – 10,020 levels.
Thus, the ongoing correction may take a halt around the mentioned reversal zone. On the flipside, strong resistance for the index is placed in the zone of 10,280 – 10,340.
Q) What should be the strategy of investors?
A) We continue to remain positive as long as 10,000 is sustained on the Nifty and the current correction can be utilised to enter into fresh long positions. The Nifty December 10200 Call options can be considered for taking a long bet on the Nifty.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
