For Private Circulation Only
Technical and Derivatives Review
| October 23, 2020
Some tentativeness around 12000, but odds in favor of bulls
Sensex (40686) / Nifty (11930)
Source: Trading View
Future outlook
All global markets had a mid-week hiccup in the previous week and we too reacted to it in the form of a decent single day correction
on Thursday i.e. 15th October. Fortunately, the major support zone of 11650- 11600 was defended successfully on the subsequent
day. The follow up of the same was witnessed this Monday as our markets kick started the week on a cheerful note. Although we
could reclaim 12000 this week, the momentum was clearly lacking as the benchmark once again looked a bit tentative around this.
For index specific traders, it was clearly a dull week as we witnessed a lot of choppy trades with no clear direction. Eventually, the
Nifty concluded the week with more than a percent gains as compared to the previous week close.
Now, let’s dig into a bit of technicals and understand why 11650 11600 is considered to be a strong as well as crucial support zone.
If we connect all major highs from record highs in a descending order, the trend line / pull back support comes around this level,
which coincides with the 20-day EMA as well. Hence, as long as this support is not violated, one should adopt a buy on dips strategy.
A close below 11650 11600 would result in a short term trend reversal and hence, traders should start lightening up positions after
it. Before this, intermediate supports are at 11820 11775. Now, we are tad below 12000 and if we have to pre-empt any direction,
we expect the Nifty to surpass 12000 – 12050 levels in coming days to head towards 12200 – 12400.
If we are anticipating this to happen then there has to be some technical evidences to back this hypothesis and they are as follows:
1) The ‘RSI-Smoothened’ for Nifty on weekly time frame chart has started moving northwards after entering a bullish territory above
the 70 mark, which is likely to provide impetus, 2) After a long underperformance, banking started to show inherent strength and as
we all know when financial starts participating in any rally; it is to be considered the robust one. To add to our conviction, the ‘ADX
14’ indicator on the daily chart is moving northwards after surpassing the 25 mark. This development generally unfolds a big trended
move, 3) The undercurrent is strong and we are seeing different sectors participating one after another and the way midcap index is
poised, another percent up move from hereon would confirm a strong breakout in ‘Nifty MIDCAP 50’ index. So, considering all this,
odds are very much in favor of the bulls. But since we are approaching a mega global event (US Presidential election), we may see
some volatility increasing and hence, keep a regular tab of all above mentioned levels.
For Private Circulation Only
Technical and Derivatives Review
| October 23, 2020
Fresh longs despite choppy move
Nifty spot closed at 11930.35 this week, against a close of 11762.45 last week. The Put-Call Ratio has increased from 1.31 to 1.47.
The annualized Cost of Carry is positive at 2.04%. The Open Interest of Nifty Futures has increased by 7.31%.
Derivatives View
Nifty current month future closed with a premium of 4.00 points against a premium of 2.70 points to its spot. Next month future is
trading at a premium of 28.30 points.
As far as Nifty options activities are concerned, 11900-12500 call options added fresh position; wherein, 12200 and 12500 calls
added huge positions. On the flip side, we saw decent writing in 11800 and 11900 put strikes. Maximum open interest for the
monthly series is placed at 12500 call and 11500 put options.
We started-off the week on a cheerful note and saw follow-up buying to reclaim 12000 mark. However, buying interest was missing
at the higher levels and hence we saw index consolidating in the range of 250 points. Eventually, week concluded on a positive note
along with addition of fresh longs. The banking index once again outperformed the benchmark index and concluded the week with
the gains of 4%. Stronger hands preferred adding few shorts; however, the quantum remained insignificant. At present, 11750-
12050 is the immediate trading range and any move beyond these levels may bring back the directional move.
Weekly change in OI
Short Formation
Chg (%)
BRITANNIA 1818200 83.92 3474.80 (7.58)
Long Formation
Chg (%)
M&MFIN 23009364 48.07 135.15 7.35
For Private Circulation Only
Technical and Derivatives Review
| October 23, 2020
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chnical 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