For Private Circulation Only
Technical and Derivatives Review
| August 14, 2020
Nifty finally gives up around 11350
Sensex (37877) / Nifty (11178)
Source: Trading View
Future outlook
This week, our markets started off higher owing to favorable cues from the global peers. Subsequently, index slipped into a
consolidation mode as the real focus shifts to the mid and small cap universe. For the first four straight sessions, Nifty gyrated in a
very slender range around 11300-11350. The similar price behavior was witnessed on Friday as well during the first half. However,
all of a sudden, major global markets started correcting sharply which had a rub off effect on our market as well. Nifty which was
merely vacillating in a range of 80-100 points throughout the week, finally succumbed to the selling pressure and went on to test the
11100 mark. Eventually, due to modest recovery towards the fag end, Nifty concluded the week tad below 11200, marking more
than a percent loss on Friday.
Friday’s correction was no surprise to us as we have been consistently advocating caution in our intra-week commentary as well as
previous weekly report. Let us first understand why 11300 11350 is considered to be a sturdy wall. Firstly, the 78.6% retracement
of the entire fall from 12430.50 to 7511.10 comes around it. Secondly, the 100% ‘Price Extension’ of the first up leg (7511.10 -
9889.05) from 8806.75 precisely coincides around 11300-11350. Now, if we take a look at the daily chart, the ‘Head and Shoulder’
pattern is clearly visible and this is what we mentioned in our daily commentary. Friday’s low precisely coincides with the neckline
level of this pattern. Hence, going ahead, a breach of 11100 would lead into an immediate correction towards 10975 10875. Here,
10875 would be seen as a key support, because a breach of this would result in a strong corrective move in the next few days. This
was overall a price-wise hypothesis on Nifty; but we would also like to highlight one time-wise observation as well. On the weekly
chart, if we apply ‘Fibonacci Time Series’ from March lows, the current weekly candle ends 6th ‘Time Zone’ and is entering a new
one. Generally, such points are considered a potential reversal zone and hence, one needs to be a bit cautious going forward as our
anticipation may probably turn into a reality below 11100.
Throughout this week, our benchmark did nothing and the real action was seen in the broader market. As we all know, when mid
and small cap counters start moving, it generally creates a euphoric situation and this is exactly what we witnessed. Since the
MIDCAP 50 was approaching the ‘200-SMA’ on the weekly chart, we advised caution on Thursday and the index obliged to our view.
To summarize, we would like to mention that even if the market goes through some corrective phase for some time, it will certainly
not be as severe as the March one. Hence, a healthy correction would probably provide better entry points for those who have
missed the bus in the last few months.
For Private Circulation Only
Technical and Derivatives Review
| August 14, 2020
11300 now seen as a hurdle
Nifty spot closed at 11178.40 this week, against a close of 11214.05 last week. The Put-Call Ratio has decreased from 1.60 to 1.31.
The annualized Cost of Carry is positive at 2.08%. The Open Interest of Nifty Futures has decreased by 0.39%.
Derivatives View
Nifty current month future closed with a premium of 8.30 points against a premium of 12.15 points to its spot. Next month future is
trading at a premium of 26.10 points.
As far as Nifty options activities are concerned, 11300-11400 call options witnessed some open interest addition whereas 11100-
11000 and 10600 puts have seen some open interest addition. Maximum open interest for the coming weekly series is at 11300 call
and 11000 put option.
The indices consolidated within a range for most part of the week, but it corrected in later half on Friday and ended below 11200.
While no significant build up was seen in Nifty, open interest increased by about 14 percent in Bank Nifty. During the week, FII’s did
not add any significant fresh positions in index futures, however, they formed some short positions in stock futures. On the other
hand, retail clients formed bullish positions through index options segment. The options data hints a resistance now at 11300 for
the coming week and support at 11000. The build in put options in the coming weekly segment is low, but the monthly series has
decent build up at 11000 put. Traders are advised to keep a tab of the same as any unwinding in those positions could lead to some
correction in the near term. Thus, one should avoid forming aggressive positions and trade with proper risk management.
Weekly change in OI
Short Formation
Chg (%)
CONCOR 6791235 69.86 379.35 (16.54)
Long Formation
Chg (%)
ZEEL 43485000 33.66 161.75 7.51
For Private Circulation Only
Technical and Derivatives Review
| August 14, 2020
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Technical and Derivatives Team:
Sameet Chavan Chief Analyst – Technical & Derivatives sameet.cha[email protected]g.com
Ruchit Jain Senior Analyst - Technical & Derivatives ruchit.jai[email protected].com
Rajesh Bhosale Technical Analyst rajesh.bhosl[email protected]ng.com
Sneha Seth Derivatives Analyst [email protected]gelbroking.com