Representative image
The Nifty50 snapped its two-day losing streak and closed the rangebound session with moderate gains on March 27, taking positive cues from European peers. The index has formed a Doji kind of pattern on the daily timeframe as the closing was similar to opening levels, indicating indecisiveness among buyers and sellers about the future market trend.
The index managed to close a tad above the lower threshold of the channel after volatility. After initial ups and downs, the index largely traded higher within a range of 16,950-17,090 for the rest of the session. And finally settled at 16,986, up 41 points.
Overall the index has been in a trading range of 16,800-17,200 for a couple of weeks and within this range, every dip is getting bought and every rise is seeing profit-taking. Unless and until this range gets broken on either side, the index may remain volatile with a negative bias, experts said.
“Normally, a formation of Doji after a reasonable decline calls for a reversal of a downtrend. But, the market is moving within a broader range and the pattern implication of Doji could be less in the near term,” Nagaraj Shetti, Technical Research Analyst at HDFC Securities said.
He feels the short-term trend of Nifty continues to be weak with high volatility.
“The market is showing a lack of strength to sustain the highs. There is a possibility of Nifty revisiting the recent swing lows of 16,800 in the short term. Any attempt of upside bounce towards 17,100-17,150 levels could be a sell-on-rise opportunity,” Shetti expalined.
Option data
Per monthly Option data, we have seen maximum Call open interest at 18,000 strike, followed by 17,000 strike and 17,500 strike, with Call writing at 17,000 strike, then 17,800 strike, whereas the maximum Put open interest was seen at 17,000 strike, followed by 16,800 and 16,500 strikes, with Put writing at 17,000 strike, then 16,800 strike.
The above data indicated that 17,000 is expected to be a crucial level on either side of the firm direction, with near term trading range at 16,800-17,100 levels.
“For the current weekly expiry, traders are not yet expecting the fall to be very large below the 17,000 level, as the 17,000 short straddle players have not yet exited their positions or rolled down the strikes to lower straddles,” Rahul Ghose, Founder & CEO – Hedged said.
If the Nifty index closes below the 16,750 level, all these sellers will get trapped leading to another 200-point fall in the index, but until that happens, it is better to maintain a sideways to bearish view on the index, he advised.
Bank Nifty
Bank Nifty also closed with moderate gains of 36 points at 39,431 after getting stuck with a broader trading range. It touched an intraday high of 39,695 and a low of 39,274 after a flat opening.
The index has formed a small-bodied bearish candle on the daily scale, making lower top lower bottom for the second straight session.
“Now, till it holds below 39,750 levels, the bounce could be sold for the weakness towards 39,000 and 38,888 zones while on the upside hurdles exist at 39,750 and 40,000 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
The broader markets underperformed benchmarks as the breadth was completely in favour of bears. The Nifty Midcap 100 and Smallcap 100 indices fell half a percent and 1.6 percent, respectively as about four shares declined for every rising share on the NSE.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.