'Negative trend seen as momentum oscillator RSI drifts southward on daily, weekly scale'

Chandan Taparia

Nifty index continued the negative momentum for the second consecutive week and formed a bearish candle on the weekly scale. During the week, it bounced to 9,584 levels but that was short-lived and index again retested weekly low near to 9,050 levels.

On an intraday chart, it is forming a Head & Shoulder pattern which has bearish implication and a breakdown below 9,000 may result in further selling pressure. Momentum oscillator RSI also turned southward on both daily and weekly scale, which is a negative sign for the index.

Going forward, immediate support is placed at 9,000 and below that weakness could extend towards 8,800 then 8,600 levels, while major hurdle is placed at 9,350 and then 9,450-9,500 zone.

Chandan Taparia

Vice President and Analyst-Derivatives|Motilal Oswal Financial Services

• 'Caution advised for longs till Nifty surpasses 9,450-9,500 zone'

• Rollovers higher than three-month average, but lower OI indicates volatile swing

• Bank Nifty may move towards 21,500, option traders can trade with 'Bull Call Spread'

India VIX fell by 1 percent from 38.40 to 38 levels on a weekly basis. VIX has been hovering near to 38-40 levels from last six trading sessions.

On the monthly options front, maximum Call open interest is at 10,000 then 9,500 strike, while maximum Put open interest is at 9,000 then 8,500 strike. We have seen Put writing at 8,800 followed by 8,500 strike, whereas, Call writing was seen at 9,300 followed by 9,600 strike. Options data indicates an immediate trading range in between 8,800 to 9,500 levels.

Bank Nifty underperformed the benchmark for the second consecutive week and formed a bearish candle on the weekly as well as daily scale. It is sustaining below trendline breakdown level and 20 DEMA, which doesn't bode well for the bulls.

RSI also turned southward from its resistance zone on both daily and weekly chart, indicating weakness in the index. Looking at the current structure, till the time it sustains below 19,500, we may see selling pressure towards 18,200 zone and below that 17,500-17,200 levels. Resistance can be seen at 19,500 and then 19,800-20,000 levels.

Stock wise positive setup is seen in Bharti Airtel, MCX, Ramco Cements while negative setup is seen in PVR, LIC Housing Finance, PSU Banks.

(The author is Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.)

Date: May 19