1
For Private Circulation Only
Technical and Derivatives Review
| September 05, 2020
Some pause to recent euphoria, all eyes on news flow
Sensex (38357) / Nifty (11334)
Source: Trading View
Future outlook
Last Friday, we had a strong close at new six-month high and the same optimism was carried on Monday too. Our markets opened
with a good bump up, owing to cheerful mood across the globe. Everything looked hunky dory but all of a sudden, the massive sell
off triggered in our markets after the news of India-China clash at the border. Eventually it turned out to be one of the terrible days
in the recent past. Post this, markets consolidated and gave a minor recovery for next three trading sessions. However, on Friday,
the selling once again resumed to close almost at the lowest point of the week.
On the first day, the geopolitical concerns became the caveat in dragging markets lower and then a sharp profit booking in US
markets weighed down heavily. All in all, our markets needed some reason to correct and it was provided by all these developments.
The velocity of the fall after a relentless run is generally scary and hence, we were advocating some caution since last a couple of
weeks. Because it is very difficult to react to such sharp u-turns and we may remain caught on the wrong side. Hence, sometimes it’s
better to be a bit proactive. Now looking at the technical set up, with this week’s price activity, we can see a formation of ‘Bearish
Engulfing’ pattern on weekly chart. It is generally considered a reversal pattern and a breach of 11300 would result into a
confirmation of the same. In this case, we may see immediate decline towards 11150-11000-10870 in the forthcoming week.
However, it is important to take a note that since the larger degree trend is strongly up, we would consider any decline as a
corrective move within the up trend and hence, it will nowhere be closer or similar to March’s mayhem. In fact, it would certainly
provide better opportunities to accumulate quality propositions for a longer run.
In case, if market witnesses some bounce back, 11500-11650 remains to be a stiff hurdle. Also, it would now be very difficult for
Nifty to surpass 11800 soon. It is most likely that we would either see some price or time wise correction before Nifty heading
towards pre-COVID levels. Let see how things pan out and since a lot of news flow on domestic as well as global front is likely to
drive short term moves, we advise traders to keep a regular tab on these developments. Also, in our sense, we are likely to get
decent stock specific opportunities on both sides and hence, it’s better to follow them by maintaining strict stop losses.
2
For Private Circulation Only
Technical and Derivatives Review
| September 05, 2020
Short formation in Banking drags market lower
Nifty spot closed at 11333.85 this week, against a close of 11647.60 last week. The Put-Call Ratio has decreased from 1.64 to 1.22.
The annualized Cost of Carry is positive at 2.88%. The Open Interest of Nifty Futures has decreased by 10.29%.
Derivatives View
Nifty current month future closed with a premium of 17.90 points against a premium of 27.65 points to its spot. Next month future
is trading at a premium of 36.15 points.
As far as Nifty options activities are concerned, 11500-11800 call options added open interest whereas 11600-11400 put options
witnessed unwinding of some positions. Maximum open interest for the weekly series is at 12000 call and 11000 put option.
However, 11500 and 11600 call options also have good amount of open interest outstanding indicating immediate resistance zone.
Nifty started the week with a gap up opening, but witnessed a sharp sell off in Monday’s session. After some consolidation during
the week, the index again corrected on Friday and ended the week with a loss of over 300 points over previous week’s close. Nifty
witnessed unwinding of long positions during the week as the open interest decreased by over 10 percent. Bank Nifty under
performed the benchmark and corrected by over 6 percent due to a combination of long unwinding and short formation. FII’s
started the September series with good amount of long positions in the index futures; however, as the market corrected they
unwound some of their longs and even added some short positions. Due to this, their ‘Long Short Ratio’ has declined from 77
percent to 53.6 percent. The weekly options data indicate a stiff resistance 11500-11600 for the coming week. No major put writing
is seen yet and positions indicate support around the 11000 mark. INDIA VIX increased by 20% during the week and ended above 22
mark. The above derivatives data and the positioning by the stronger hands indicate uncertainty in the near term. Hence, traders are
advised to stay light on positions and look for stock specific opportunities where opportunities could be there on both the sides of
the trade.
Weekly change in OI
Short Formation
Scrip
OI
Futures
OI
Chg (%)
Price
Price
Chg(%)
MUTHOOTFIN 3373500 49.68 1127.95 (7.14)
PAGEIND
156900
24.73
18525.15
(8.18)
MGL
2091600
35.85
889.90
(8.48)
DLF
27792600
26.49
154.55
(10.77)
PNB
56070000
15.62
33.65
(9.66)
Long Formation
Scrip
OI
Futures
OI
Chg (%)
Price
Price
Chg(%)
ESCORTS 2701600 18.76 1190.50 4.17
WIPRO
26153
600
6.32
276.85
1.17
TATAMOTORS
72042300
4.30
148.35
3.42
INDIGO
2581500
3.55
1255.10
5.60
3
For Private Circulation Only
Technical and Derivatives Review
| September 05, 2020
Research Team Tel: 022 - 39357600 (Extn – 6844) Website: www.angelbroking.com
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Technical and Derivatives Team:
Sameet Chavan Chief Analyst – Technical & Derivatives sameet.chavan@angelbroking.com
Rajesh Bhosale Technical Analyst rajesh.bhosle@angelbroking.com
Sneha Seth Derivatives Analyst sneha.seth@angelbroking.com
