F&O: Option band signals shift in lower trading range for Nifty

By Chandan Taparia

Nifty opened gap down in line with the weak global cues and witnessed sustained selling pressure throughout the session on Thursday.

The index breached its 200-DEMA and formed a Bearish Marubozu candle on the daily chart. It has been making lower highs and lower lows from the last three sessions, and on Thursday broke two crucial supports of 10,777 and 10,650 levels.

Now, till it holds below 10,777, it could extend weakness towards next meaningful support of 10,550 and then 10,480 zone. On the upside, immediate hurdle is seen at 10,650 and then 10,777 level.

On the options front, maximum Put open interest (OI) was seen 10,000 followed by 10,200 strikes, while maximum Call OI was at 11,000 followed by 10,900 strike.

Meaningful Call writing was seen at 11,000 followed by 10,700 strike, while Put unwinding was at most of the immediate strikes. Option band signifies a lower trading band between 10,500 and 10,800 levels.

India VIX moved up by 5.62 per cent to 19.42 level. VIX not cooling down and hovering at higher band suggest restricted upside and volatile swing in the market.

Bank Nifty continued its negative momentum and slipped by more than 350 points to settle at 26,200. It has been forming lower highs and lower lows from the past three trading sessions. The index has broken immediate support of 26,666 and 26,350 levels, and till it holds below the 26,350 mark, it could extend weakness towards 26,000, and then 25,800 levels. On the upside, medium term hurdle was at 26,666 level.

The Nifty futures closed in the red with a loss of 1.92 per cent at 10,619. Built-up of long positions were seen in Siemens, Federal Bank and MGL while shorts were seen in Mindtree, L&T Finance, Escort and Indigo.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)