Technical and Derivatives Review | December 14, 2018
Above 10840, Santa rally on for our markets
Sensex (35963) / Nifty (10805)
Source: Trading View
Future outlook
It was certainly an eventful week for our markets and importantly, whatever action happened for the major part, it was only on the
domestic factors. Post the weak session on Monday, our markets opened significantly lower on Tuesday, taking cues from the exit
poll numbers and abrupt Resignation of RBI Governor Mr.Urjit Patel. However, market left everything behind and had a spectacular
recovery on the same day to defend key levels. This lead extended on the following day as market gladly welcomed appointment of
a new governor Mr. Shaktikanta Das. Last couple of days was a bit subdued; but eventually Nifty concluded the week by adding over
a percent to the bulls’ kitty.
Tuesday’s session was a critical one for our market and the way it recovered, it certainly set the tone for some optimism. The low
during the day precisely coincided with the 61.8% Fibonacci retracement of the recent up move. In addition, the other heavyweight
index (Bank Nifty) managed to reclaim its position above the 200-day SMA, which was a sign of strength. But the real highlight was
the smart rally in ‘Midcap’ index, which continued for one more day as well. In last couple of sessions, index struggled after reaching
the crucial point of 10840. We saw some tentativeness around it and hence, can be termed as a corridor of uncertainty. Let us
understand why this level has some significance? On the hourly chart, we had a breakdown from this crucial swing low on December
05. Hence, this previous support is now acting as a resistance. Secondly, we can see a convergence of two important trend lines on
daily chart precisely around the same level. Hence, unless we see Nifty breaking out convincingly from this wall, traders should avoid
aggressive bets in the market.
But once the Nifty manages to surpass 10840, we may possibly see the beginning of Santa rally in our market, which would
immediately lift the index towards 10941 and above. On the downside, 10749 followed by 10700 would be seen as crucial supports.
This week, our markets reacted mainly on domestic factors; but now, the focus again may shift to the outer world. One needs to
keep monitoring how things pan out across the globe and with US fed meeting slated in the forthcoming week, we may see some
volatility in the global peers.
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Technical and Derivatives Review | December 14, 2018
Falling Implied Volatility hints scope of further strength
Nifty spot closed at 10805.45 this week, against a close of 10693.70 last week. The Put-Call Ratio has increased from 1.47 to 1.53.
and the annualized Cost of Carry is positive at 3.86%. The Open Interest of Nifty Futures decreased by 0.86%.
Derivatives View
Nifty current month future closed with a premium of 14.85 points against a premium of 41.45 points to its spot. Next month future
is trading with a premium of 64.30 points.
As far as Nifty options activities for the week are concerned, some build-up was seen in 10800- 11000 call options. On the flip side,
10600- 10800 put options added good amount of open interest; followed by unwinding in 11000 strike. Maximum open interest for
December series now stands at 11000 call and 10000 put options.
It was indeed an eventful week for our market, as we had import event of state election result lined up. Our market collapsed below
10350 mark on Tuesday as the Urjit Patel resigned as a RBI Governor and also due to the unfavorable exit poll for BJP. However, we
witnessed a sharp recovery thereafter to bring index above 10800 mark on the closing basis. During the week, we saw blend of long and
short covering in Nifty futures; whereas, good amount of short covering took place in the Banking index. In options front, 10700 and 10800
put options continued adding fresh positions; we believe writing took place these strikes which is certainly the sign of further. Taking into
consideration the above data points, we may soon see index surpassing the immediate hurdle of 10820-10840; hence, dips in market shall
be an opportunity to add fresh longs.
Long Formation
Short Formation
Chg (%)
Chg (%)
Chg (%)
Chg (%)
Weekly change in OI
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Technical and Derivatives Review | December 14, 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
For Technical Queries
E-mail: [email protected]
For Derivatives Queries
E-mail: [email protected]
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