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Technical and Derivatives Review |June 06, 2020
Nifty finally enters five digit territory, further move likely
Sensex (34287) / Nifty (10142)
Source: Trading View
Future outlook
It was certainly a great start for the new trading week as well as the June month. Last month, there was a gap down opening at the
inaugural day and on Monday, precisely that downside gap area was filled to kick off the new month. Our markets continued their upwards
trajectory to enter a five digit territory beyond 10000 after nearly three months. After a good head start, markets took a pause and saw
some profit booking for couple of days. But without much damage, the buying re-emerged at lower levels on Friday to conclude the week
with whopping 6% gains from the previous weekly close.
Technically speaking, Monday’s gap up opening turned out to be a game changer for the bulls. Because After the April month ecstatic
move, May started with some negativity and the same precisely got reversed with such bump up. Since the previous gap was filled by yet
another gap, this time bears got caught completely on the wrong foot. Now looking at the current set up, we remain upbeat as long as 9900
holds on a sustainable basis and this is what we alluded post Thursday’s close as well. Since the recent move was mainly propelled by the
banking space, we were convinced of the rally in last couple of weeks. Now along with banking, we could see contribution from the broader
market too, indicating sign of a robust move. This week, although we struggled at 10200, the positioning of RSI-Smoothened indicates
possibility of extending this move towards 10500-10700 levels. Hence traders are continuously advised to stay on the positive side as long
as 9900 is being held.
Apart from this, we take this opportunity to highlight some notable observations. If we look at two major global indices, DOW JONES and
DAX, both have retraced almost 78% from the March lows but we are trading tad above 50%. Hence, if we have to see the catch up move,
mentioned levels are very much on cards now.
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Technical and Derivatives Review |June 06, 2020
Market rallies due to long formations
Nifty spot closed at 10142.15 this week, against a close of 9580.30 last week. The Put-Call Ratio has decreased from 1.61 to 1.50.
The annualized Cost of Carry is positive at 0.60%. The Open Interest of Nifty Futures has increased by 11.42%.
Derivatives View
Nifty current month future closed with a premium of 3.35 points against a discount of 98.05 points to its spot. Next month future is
trading at a premium of 0.10 points.
As far as Nifty options activities for the week are concerned, we witnessed open interest unwinding in 9500-10000 call options. On
the flipside, 10000-9700 put options saw open interest addition. Maximum open interest for the June monthly series now stands at
10000 call option and 9000 put option.
During this week, indices rallied higher with formation of long positions in Nifty and a combination of short covering and long
formation in Bank Nifty. We witnessed good open interest addition in 10000-9700 put options indicating support base shifting
higher. FII’s bought equities in the cash segment during the week while they formed marginal short positions in index futures. If we
look at stock specific build up, many stocks from the derivatives space witnessed long formations while the broader markets too
witnessed good momentum. The options data hints good support at 10000 mark for the near term whereas on the higher side the
momentum could lead the index towards 10300 and 10500 mark. Hence, traders are advised to continue to trade with a positive
Long Formation
Chg (%)
Chg (%)
CANBK 13087000 48.72 104.65 25.71
PNB 81235000 44.05 33.90 26.49
INDIGO 3420800 22.87 1178.80 22.59
JINDALSTEL 18800000 22.48 146.10 21.14
BANKBARODA 62561200 19.14 46.65 20.54
Weekly change in OI
Short Formation
Chg (%)
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Technical and Derivatives Review |June 06, 2020
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