For Private Circulation Only
Technical and Derivatives Review
| December 19, 2020
Bulls reluctant to give up; Nifty ends above 13750
Sensex (46961) / Nifty (13761)
Source: Trading View
Future outlook
Nifty started the week tad below 13600 and consolidated in a narrow range for initial couple of sessions. But the positive global
market sentiments then provided an impetus to the ongoing rally and the index continued it uptrend for the rest of the week to
clock new records and end above 13750.
The bulls seem to be reluctant to give up and hence, we have seen intraday dips were getting bought into throughout the week.
Nifty is trading all time high and although there’s no limit on the upside, reciprocal retracements usually indicates where the
markets could resist in such a trend. If we observe positional charts and take retracements of the previous corrections, then 127%
retracement of the previous correction from 12430 to 7511 comes around 13770 and that is where Nifty is placed right now. On the
other hand, the RSI-smoothened oscillator is trading at level above 95 on the daily chart which is a highly overbought zone. Usually,
when the momentum readings are in such overbought zone and market approaches resistance, it leads to either a price-wise or a
time-wise correction in short term. Hence, we advise that traders should avoid getting carried away now and avoid aggressive
buying at current levels. Infact, booking profits on existing longs and taking some money off the table is also recommended. Having
said that, one should not give less importance to the price structure which has not yet given any signs of reversal. Hence, for the
coming week, focus would be more on the price action and we would wait for indications from that front.
The banking index which has resumed its rally and has outperformed in last couple of months has now been facing resistance
around the 31000 mark. As far as Nifty levels are concerned, 13770-13800 is the immediate resistance as per the retracement
theory mentioned above. If the index moves beyond this range, then it would eye the 14000 mark for the first time ever. On the
flipside, 13650 is the immediate support which if breached, then it could result in some profit booking and drag the index towards
For Private Circulation Only
Technical and Derivatives Review
| December 19, 2020
Stretched PCR-OI hints sign of caution
Nifty spot closed at 13760.55 this week, against a close of 13258.55 last week. The Put-Call Ratio has increased from 1.57 to 1.77.
The annualized Cost of Carry is positive at 2.75%. The Open Interest of Nifty Futures has increased by 9.87%.
Derivatives View
Nifty current month future closed with a premium of 13.50 points against a premium of 53.05 points to its spot. Next month future
is trading at a premium of 53.40 points.
As far as Nifty options activities are concerned, we saw some build-up in 13900-14400 call options. On the put side, 13500-13700
strikes added decent build-up and we believe these are short positions. Maximum open interest for the monthly series is placed at
14000 call and 13700 put options.
Last week, we witnessed some consolidation for the initial two sessions. However, smart buying was seen thereafter to rally beyond
13750 mark. In F&O segment, the upmove seen in Nifty was supported by long positions. In case of banking index, no major build-up
was seen in the week gone by. In options front, we witnessed strong writing in Nifty puts which resulted in PCR-OI surging to 1.77. At
present, this ratio is on the higher side and thus, hints market is overbought now. FIIs continued exiting from long and
simultaneously preferred adding shorts in index futures; their ‘Long Short Ratio’ has plunged to 68% from 80% seen during start of
December series. Considering the above data point, we expect some profit booking soon and hence, would advise trader’s to keep
booking profits.
Weekly change in OI
Short Formation
Chg (%)
PNB 215346000 96.91 33.55 (14.41)
ESCORTS 3519450 27.90 1339.15 (1.96)
TATACHEM 7692000 17.54 491.75 (3.71)
INDUSINDBK 18810300 12.47 907.30 (1.89)
INDIGO 3069000 10.91 1653.70 (4.34)
Long Formation
Chg (%)
POWERGRID 25996000 36.02 194.15 2.37
MFSL 8080800 29.96 651.05 2.64
ASHOKLEY 40887000 20.31 98.60 4.34
IBULHSGFIN 25692800 15.16 203.85 5.54
NATIONALUM 59245000 11.06 43.75 2.10
For Private Circulation Only
Technical and Derivatives Review
| December 19, 2020
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Technical and Derivatives Team:
Sameet Chavan Chief Analyst – Technical & Derivatives sameet.cha[email protected]ng.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