Traders are suggested to go for Hedging or Bear Put Spread to continue with the negative to range bound market bias till index does not surpass crucial hurdle of 11,550-11,600 zones for Nifty
Nifty has broken its major rising trend line by connecting swing lows of 10,585, 11,108 and 11,550 levels.
It given a breakdown from its Bearish Flag and continued its selling pressure for second consecutive session. It wiped out the entire bounce back move of last seven trading sessions and drifted towards 11,400 zones.
The Index failed to hold above its 50 DEMA and key hurdle of 11,650-11,700 zones during the bounce back move in the week and broken its previous swing low of 11,461 mark. It formed a big Bearish Candle on daily as well as on weekly scale and started to form lower top - lower bottom formation on lower time frame.
Now, till Nifty remains below 11,500 zones, bounce could be sold towards next major support of 11,333 then 11,250 zones while medium term hurdles are seen at 11,650 zones.
India VIX moved up by 4.29 percent from 12 to 12.51 levels last week. Volatility index is at lowest levels of last 15 months even after sharp cut of 300 points.
On the option front, Maximum Put OI is at 11,300 followed by 11,400 strike while maximum Call OI is at 11,600 followed by 11,700 strike.
We have seen Put writing at 11,400 and 11,350 strike while meaningful Call writing is seen at 11,500 followed by 11,600 strike. A major shift in OI concentration suggests a shift in lower trading range in between 11,300 to 11,600 zones.
Bank Nifty has broken its multiple support of 30,250 zones and drifted towards 29,700 levels. It has also given a break down from its consolidation band of last eight weeks and formed a Big Bearish Candle on the daily as well weekly scale.
Now till Bank Nifty remains below 30,000 zones, weakness could extend towards 29,500 then 29,250 zones while on the upside major hurdle is seen at 30,250 levels.
Sector wise we have seen negative price formation in most of the market with sharp cut in Advance – Decline ratio. Positive set up only in IGL, PVR and HDFC Ltd while weakness in most of the Banking, Auto and NBFC stocks.Traders are suggested to go for Hedging or Bear Put Spread to continue with the negative to range bound market bias till index does not surpass crucial hurdle of 11,550-11,600 zones for Nifty and 30,250 zones for Bank Nifty.
(The Author is Derivatives & Technical Analyst at Motilal Oswal.)
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