Technical and Derivatives Review | February 23, 2018
Some respite in banking and midcap baskets
Sensex (34142 ) / Nifty (10491)
Source: Trading View
Future outlook
It was a week of consolidation for our markets as we saw a fragile start on Monday followed by some consolidation for three days
and then a good pull back move to conclude at the highest point of the week. The tail end rally was mainly propelled by the
heavyweight banking conglomerates along with the beaten down Midcap index.
Going by last few days’ price action, 10340 - 10300 seems to have earned great respect from the short sellers and due to weak
attempts to sneak through did not have any conviction at all. Hence, going ahead, we may see this consolidation or breather getting
extended for few days. On the higher side, 10500 - 10620 would be seen as immediate boundaries for the coming week. Any
sustainable move beyond this would result into a decent relief rally in the market. However, the broader picture would still remain
the same as we expect the selling to recommence at higher levels. If we have to take a directional bet, we would certainly stick to
our cautious stance considering the ‘Bearish Engulfing’ pattern on weekly chart along with the ‘RSI-Smoothened’ (daily) slipping
below the 30 mark. This indicates a probable correction towards 10200 and then to test the ‘200-day SMA’ placed around 10090
once the corrective move resumes.
At present, the near term strategy would be to follow stock centric approach if index manages to give a decent relief rally and then
use such rebounds to create fresh shorts at higher levels. This week’s weakening in Indian Rupee (INR) against the US Dollar was
clearly an alarming sign for our market. So, one should keep a close eye on this development as well along with US markets.
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Technical and Derivatives Review | February 23, 2018
Majority of long positions lightened up
Nifty spot closed at 10491.05 this week, against a close of 10452.30 last week. The Put-Call Ratio has increased from 1.07 to 1.43
and the annualized Cost of Carry is positive at 1.42%. The Open Interest of Nifty Futures decreased by 24.66%.
Derivatives View
Nifty current month future closed with a premium of 13.50 points against a premium of 31.05 points to its spot. Next month future
is trading with a premium of 46.30 points.
Being start of the series, the overall build up is quite scattered between 10400-11000 call and 10600-10000 put options. At present,
maximum open interest in call option stood at 10700 strike, whereas in put option it is placed at 10000 strike.
Post the February expiry, March series began on a positive note as the benchmark indices rallied higher on the first day of new
series. The rollover during the series was on lower side and the data indicates that majority of long positions which were rolled to
February series have been lightened up. Now, the index fut. ‘Long Short Ratio’ of FII’s is at 46.78%, which does not bode well.
Considering the above data points, we would advise traders avoiding bottom fishing as we may see further selling pressure at higher
levels. Last series, BankNifty corrected nearly 9% along with decent amount of long unwinding and addition of fresh shorts. The
major underperformance was witnessed from the PSU banks, except for IDBI all other counters closed in red MoM. At current
juncture, banking index has an immediate hurdle around the 25500 mark; whereas, 24500 and 24000 strikes of put options are
attracting traders attention.
Long Formation
Short Formation
Chg (%)
Chg (%)
Chg (%)
Chg (%
Weekly change in OI
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Technical and Derivatives Review | February 23, 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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