For Private Circulation Only
Technical and Derivatives Review
| January 29, 2021
Biggest weekly drop since September, all eyes on key event now
Sensex (46286) / Nifty (13635)
Source: Trading View
Future outlook
On Monday, despite previous Friday’s correction, we had a positive start to the last week of the January month. However, it turned
out to be a formality as markets skidded in the initial hours not only to pare down gains but also to enter a negative territory. Unlike
recent trend, the corrective move got extended beyond two trading sessions. In fact, as the week progressed, things worsened to
breach all intermediate key supports one after another. Eventually, the Nifty ended the week tad above the 13600 mark with a
massive cut over five percent on a weekly basis.
It was certainly a biggest weekly drop after September 2020 despite being a truncated week. Before anyone could realize, Nifty
wiped off more than 1100 points in merely six trading sessions. Although it was intimidating, we were not surprised of this sudden
fall; because market had hinted towards it and we continuously highlighted those caveats. Markets were deeply overbought since
many weeks, but the real indication came when we witnessed a 3-points Negative divergence’ in the RSI-Smoothened oscillator on
daily chart in all key indices (NIFTY, BANKNIFTY and NIFTY MIDCAP 50) after clocking their fresh record highs. Adding to this,
BANKNIFTY confirmed a ‘Double Top’ pattern on previous Friday after breaking its crucial swing low. Now, we are considerably off
record highs and the way charts are shaped up, it does not bode well for the short term bulls.
Now, looking at the weekly time frame close below ‘5-EMA’ along with ‘Shooting Star’ pattern on Monthly chart, the Nifty is possibly
headed towards strong support zone of Weekly ‘20-EMA’ and daily 89-EMA’ zone of 13200 13000. However, since the Finance
Minister is going to present the ‘Union Budget’ on Monday, the immediate direction would be decided on the actual outcome of the
event. But looking at the price structure, we do not expect Nifty to surpass 14000 – 14200 before completing its corrective phase. So
if market reacts positively post the event, 13800 14000 14200 becomes a cluster of resistances and a move towards this should
ideally be used to lighten up longs. On the other hand, sooner or later, the Nifty is likely to extend correction towards mentioned
levels of 13200 13000. Although we have been cautious of late, we believe that a fall towards these supports should be used to
accumulate quality propositions in a staggered manner with a broader perspective.
For Private Circulation Only
Technical and Derivatives Review
| January 29, 2021
Stronger hands rolled over bearish bets
Nifty spot closed at 13634.60 this week, against a close of 14433.70 last week. The Put-Call Ratio has decreased from 1.14 to 0.98.
The annualized Cost of Carry is positive at 5.87%. The Open Interest of Nifty Futures has decreased by 28.04%.
Derivatives View
Nifty current month future closed with a premium of 74.50 points against a premium of 59.60 points to its spot. Next month future
is trading at a premium of 109.40 points.
Last series, we witnessed follow-up selling to correct more than 5% to previous weeks closing. We witnessed decent profit booking
along with shorts in index futures and banking index continued adding shorts. Rollovers in Nifty stood at 77%, which is in line with
the three month averages. But, the open interest plunged 20% series on series which indicates we are beginning February series
with a lower base. Now, the BankNifty rollover may appear to be low if compared to the averages but if open interest is considered,
it suggests that decent amount of shorts have been rolled-over to next series. As far as FIIs activity is concerned, they preferred
rolling over their shorts formed during last series. On Friday, we saw decent writing in 13800-14000 call options. On the other side,
13500 holds highest open interest concentration. Considering the upcoming event of Union Budget, it is advisable to stay light and
pick quality stock in case of any sharp fall post the event.
Weekly change in OI
Short Formation
Chg (%)
ICICIGI 1334925 29.63 1323.00 (8.13)
INDUSINDBK 17138700 16.78 850.50 (4.57)
ICICIPRULI 4908000 13.65 483.45 (3.73)
AMBUJACEM 21108000 13.03 244.85 (5.21)
MARUTI 2580100 12.75 7251.15 (9.99)
Long Formation
Chg (%)
SRTRANSFIN 5008000 34.62 1297.50 12.69
TVSMOTOR 6123600 14.26 561.55 7.44
COLPAL 3175200 9.88 1614.00 5.99
CIPLA 17800900 7.16 831.20 2.60
ICICIBANK 94316750 3.14 540.20 1.03
For Private Circulation Only
Technical and Derivatives Review
| January 29, 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