Technical and Derivatives Review | January 12, 2018
Expect volatility to rise as we can see key indices at crucial junction
Sensex (34592 ) / Nifty (10681)
Source: Trading View
Future outlook
Markets kick started on a positive note on Friday owing to decent overnight rally in the US bourses. Subsequently, index
consolidated at record highs for initial couple of hours. However, a sharp decline during the midst of the session spooked intraday
traders as we saw Nifty hastening towards the 10600 mark. By the time, everyone could realize how market corrected, we saw index
taking a complete u-turn in the latter half to eventually close around its opening point at new highs.
Last session panned out exactly the way we had anticipated to. We had highlighted about index not finding similar sort of strength if
manages to breakout in the upward direction. Also, the possibility of volatility increasing was on the cards. All these factors were
seen during the session and due to smart recovery, the Nifty eventually ended the week on a high note. Now, the way index smartly
recovered is generally considered as a good sign; but, due to wild swings, we can now see a copy book formation of ‘Dragonfly Doji’
on daily chart. The said pattern at higher levels does not bode well and hence, one needs to be closely tracking how markets behave
in the first half of the week. Since, markets are reluctant to fall; we would rather wait for a confirmation to happen. The pattern will
get activated below its low i.e. 10597 and hence, any sustainable move below this key support would extend further weakness in
days to come. However, on the higher side, we would reiterate that the market looks a bit tired and hence, it would be a prudent
strategy to keep booking profits and staying light on positions.
Now, due to Friday’s late recovery, the recent laggard ‘Bank Nifty’ is shaped up quite interestingly. We can see a major resistance of
25800 on this index. And the way ICICI bank closed with an uptick of nearly 3% along with the entire PSU banking basket hovering
around major supports; we are likely to see make or break moves in the banking index quite soon. In case of a sustainable move
beyond this crucial point (25800), the Bank Nifty would start outperforming benchmarks; but if it fails to do so, we can see strong
profit booking happening with higher volatility.
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Technical and Derivatives Review | January 12, 2018
Options data hinting crucial junction at 10550-10600
Nifty spot closed at 10681.25 this week, against a close of 10558.85 last week. The Put-Call Ratio has increased to 1.74 from 1.58
levels and the annualized Cost of Carry is positive at 1.34%. The Open Interest of Nifty Futures increased by 14.96%.
Derivatives View
Nifty current month future closed with a premium of 5.10 points against a premium of 14.35 points to its spot. Next month future is
trading with a premium of 27.30 points.
PCR-OI has surged from 1.58 to 1.74 on week on week basis. In call options, some build-up was seen in 10700 and 10900 strikes;
followed by unwinding in 10400-10600 call options. On the flip side, we witnessed significant open interest addition in 10500-10700
put options. As a result, maximum open interest in put options shifted higher to 10500 from 10400 strike. At the same time,
maximum open interest concentration in call option is seen in 11000, followed by 10700 strike price.
The benchmark index extended its gains to hit a fresh record high of 10690.40; meanwhile, we witnessed good amount of long
formation in index futures during the week. As far as FIIs activities are concerned, except for some shorts in index futures, they
formed positive bets in F&O space. They added fresh long positions in stock futures and index call options and simultaneously
formed shorts in index put options. If we glance at options activity, Nifty put options added massive positions resulting the PCR-OI
surging to 1.74. We believe this is mainly due to hedging done prior to the budget. Considering the above data points, we expect
market to strengthen going ahead and unless index remains above 10550-10600, traders should avoid any bearish bets.
Long Formation
Short Formation
Chg (%)
Chg (%)
Chg (%)
Chg (%
Weekly change in OI
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Technical and Derivatives Review | January 12, 2018
Technical and Derivatives Team:
Sameet Chavan
Chief Analyst - Technical & Derivatives
[email protected]
Ruchit Jain
Technical Analyst
[email protected]
Rajesh Bhosale
Technical Analyst
[email protected]
Sneha Seth
Derivatives Analyst
[email protected]
Research Team Tel: 022 - 39357600
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For Derivatives Queries
E-mail: [email protected]
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