For Private Circulation Only
Technical and Derivatives Review
| February 26, 2021
Nifty back to 14500, financials leading the fall
Sensex (49100) / Nifty (14529)
Source: Trading View
Future outlook
Markets had a nervous start on Monday as we saw Nifty sliding below the key support of 14900 to even test sub-14700 levels.
However, at the midst of the week, we witnessed a v-shaped recovery in the market post some dramatic events. Everything looked
hunky dory as the February series ended convincingly above the 15000 mark. But market was not done with its twists yet as we saw
a huge gap down on Friday on the back of weak global cues. The selling augmented as the day progressed to eventually mark biggest
single day loss in last couple of months.
The one who follows ‘Technical Analysis’, gives more weightage to the price action and importantly it’s the closing point that matters
the most than a starting or in between activity. If we relate this concept to the price action in the week gone by, we did see some
healthy recovery at the midst; but all this positivity eventually went for a toss on Friday. Fortunately, we did not get carried away by
the intra-week rally and waited for the convincing move beyond 15200 to change our stance. Market failed to surpass it and in fact,
with a massive broad based sell off, Nifty has sneaked below its recent swing low of 14635.05 on a closing basis. This led to a
confirmation of first sign of trend reversal in the form of Lower Top Lower Bottom’ on the daily time frame chart. The weekly chart
already showed some exhaustion in the previous week as we observed fatigue around the strong resistance zone of 15380 15500
(which is the 161% ‘Golden Ratio’ of the entire fall from Jan’20 highs to March’20 lows).
Looking at the price structure, we expect this correction to extend towards 14200 – 14000 levels first. Here, 14000 would be seen as
crucial ‘Trend Line’ support and a breach of this would open up further space towards 13700 13500. Hence, we would be closely
observing how index behaves around 14000 in the forthcoming week. For us, the short term tide has turned downwards and the
view will remain intact as long as 15200 is not broken. On the immediate basis, 14750 14920 are to be seen as stiff hurdles.
Traders should not get intimidated if all the above mentioned scenarios turn into a reality because the larger degree uptrend is still
very much intact. Since a long time, market has not seen any major correction, so this should only be construed as a much awaited
profit booking or a short term corrective phase which is healthy in the longer run. Momentum traders should avoid aggressive or
leveraged longs for a while; rather use decent declines to accumulate quality propositions with the broader view.
For Private Circulation Only
Technical and Derivatives Review
| February 26, 2021
Short formation post expiry drags markets lower
Nifty spot closed at 14529.15 this week, against a close of 14981.75 last week. The Put-Call Ratio has decreased from 1.19 to 0.93.
The annualized Cost of Carry is positive at 4.59%. The Open Interest of Nifty Futures has decreased by 2.73%.
Derivatives View
Nifty current month future closed with a premium of 27.20 points against a premium of 43.65 points to its spot. Next month future
is trading at a premium of 105.85 points.
In options segment, the build-up is scattered between 14800-15200 calls. Maximum open interest for the weekly series is placed at
15000 call, while in puts the highest open interest are in 14800 and 14000 followed by 14800 strikes.
We had a roller coaster ride for the expiry week as the Nifty started with a sharp fall on Monday. However, it recovered during mid-
week and ended the monthly expiry above 15100. A sharp sell-off in global markets then led to a gap down opening on the first day
of the new series and our markets witnessed a follow up selling to end the week tab above 14500 mark. The rollovers were above its
average which indicated longs positions rolled to the March series. However, Friday’s gap down open completely baffled traders and
thus we witnessed long unwinding and short formation in both the indices on the last day. In options segment, writers preferred to
sell call options of 14800-15000 strikes on Friday which could limit the upside on pullback moves. Some long build up was seen in
14800 put option while the data indicates support around 14200-14000. The Banking and the Auto space witnessed short
formations on Friday and thus, we could see some further pressure in the coming week to drag the index towards the mentioned
Weekly change in OI
Short Fo
Chg (%)
RECLTD 19080000 36.48 134.85 (7.45)
Long Formation
Chg (%)
SAIL 123595000 16.16 77.05 18.08
For Private Circulation Only
Technical and Derivatives Review
| February 26, 2021
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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