For Private Circul
ation Only
Technical and Derivatives Review
| January 22, 2021
Market erased weekly gains; courtesy to brutal knock in financials
Sensex (48879) / Nifty (14372)
Source: Trading View
Future outlook
Last Friday’s weakness was carried over this Monday as well and hence, Nifty witnessed a decent corrective move on the opening
day to test sub-14300 levels. However, the bulls were not ready to give up easily as they came back strong on the subsequent two
sessions on the back of overall global optimism. In the process, almost all major sectoral indices registered their new record highs.
Everything looked hunky dory until the sudden profit booking took place in the last hour of the weekly expiry. This sell off went on to
intensify on the last day of the week to erase all weekly gains to conclude tad below the 14400 mark.
Early this week, markets took a smart U-turn on lot of positivity across the globe. Although, new highs were being hit, we were not
convinced with the move and we had clearly stated this in our intra-week commentary. The main reason behind this was indices
(NIFTY, BANKNIFTY and NIFTY MIDCAP 50) making new highs with the 3-points Negative Divergence in the RSI-Smoothened oscillator
on daily chart. Such divergence with 3 points is generally considered a sign of caution and hence, repeatedly we advised not getting
carried away by the euphoria. Now, although Nifty has not broken any major supports, the development in BANKNIFTY does not
look encouraging at all. In fact, the entire banking and financial space was the major culprit behind Friday’s correction as they took a
solid knock. To be specific, BANKNIFTY has confirmed a double top pattern on daily chart and has broken its important swing low
with an ease. The weekly chart of the same exhibits a confirmation of ‘Long Legged Doji’ pattern. For Nifty, the important support to
watch out would be 14222, below which the recent bullish structure will get distorted to extend the correction towards 14000
13800 levels. On the higher side, 14500 – 14632 would be seen as immediate hurdles.
Historically, it is rare to see a major trend reversal ahead of any mega event. Hence, it would be interesting to see how things pan
out in the forthcoming week as the Union Budget is around the corner. Looking at the price development, it does not look
encouraging. All eyes should be on the financial space; because if further weakness has to come, it would certainly be led by this
space. We continue to advise staying light on positions and should ideally avoid creating leveraged positions ahead of the budget
(especially in high beta counters). With a broader view, if any significant correction comes, it would be a great opportunity to
accumulate quality propositions in a staggered manner.
For Private Circul
ation Only
Technical and Derivatives Review
| January 22, 2021
Call writers added fresh positions as indices correct
Nifty spot closed at 14371.90 this week, against a close of 14433.70 last week. The Put-Call Ratio has decreased from 1.19 to 1.14.
The annualized Cost of Carry is positive at 3.49%. The Open Interest of Nifty Futures has decreased by 3.73%.
Derivatives View
Nifty current month future closed with a premium of 8.25 points against a premium of 24.80 points to its spot. Next month future is
trading at a premium of 48.05 points.
As far as Nifty options activities are concerned, we saw open interest build-up in 14500-14800 call options indicating call writers
adding shorts at higher strike price. Maximum open interest concentration is at 15000 followed by 14600 call options and at 14000
Post a negative start on the first day of the week, the Nifty pulled higher on next couple of sessions and registered new high around
14750 on Thursday. However, we witnessed a correction in the later half on Thursday which continued on the last day as well and
the index ended the week below 14400. Nifty witnessed unwinding of some positions while short formations were seen in Bank
Nifty. FII’s added some short positions in the index futures and hence, their ‘Long Short Ratio’ has declined to tad below 60 percent.
In options segment too, call writers have added decent amount of positions and hence, upside seems to be limited in the coming
expiry week. Traders should prefer to lighten up longs on any pullback moves towards 14450-14500. The immediate support is for
Nifty is placed around 14200 and it would be crucial to see how the market if it comes around this support.
Weekly change in OI
Short Formation
Chg (%)
BIOCON 17657100 50.41 394.90 (13.94)
Long Formation
Chg (%)
APOLLOTYRE 19985000 51.69 232.60 26.24
For Private Circul
ation Only
Technical and Derivatives Review
| January 22, 2021
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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