Nifty at a level where one can initiate short iron butterfly and non-directional strategies: Jay Thakkar

Jay Thakkar, Vice President & Head of Alternate Research, Sharekhan, says “as far as Nifty is concerned, I would say that we have seen a lower top formation now in yesterday's session. So, the recent hike since this rally began from 16,800, 18,458 that is the peak. Post that, we have seen 18,392 – 18,400 rounded off. So we have seen a lower top and now the previous lows were 18,060. We can see 18,000 to 18,050 levels on the lower side. So, overall, Nifty's momentum also on the daily charts have gone into the sell mode.”


First of all, because it is the expiry day, it appears to be a bit of a struggle to take out that 18,300-18,400 mark and 44,000 mark very convincingly for the benchmarks. Let us get your views first on the benchmarks and then we will talk about other stocks.
We also have been recommending the hotel sector to our clients and the sector has done well and the overall outlook is positive. But as far as the indices are concerned, interestingly, Bank Nifty is trading within that band of 400-500 points almost since the last eight days. That is a rare phenomenon and that does not happen that often on Bank Nifty, especially when it trades within this percent range. It happened last to last expiry.


But in the last two years, three years, it has been doing quite well. Now, this consolidation, whichever side it breaks, if Bank Nifty closes below 43,500, it would be a concern today. We have the maximum number of put writers out there. At 44,000 on the upside, we have the highest call option writers there. Technically, too, it is a clear sideways rectangular pattern that has been formed on the daily, hourly charts.

As far as Nifty is concerned, I would say that we have seen a lower top formation now in yesterday's session. So, the recent hike since this rally began from 16,800, 18,458 that is the peak. Post that, we have seen 18,392 – 18,400 rounded off.

So we have seen a lower top and now the previous lows were 18,060. We can see 18,000 to 18,050 levels on the lower side. So, overall, Nifty's momentum also on the daily charts have gone into the sell mode. The hourly charts have gone into the same mode. The PCR is trading below the one.

So, the expiry is likely to happen below the levels of 18,300 in today's session. I think that is a clear cut resistance on the upside. On the lower side, 18,200 from an intraday perspective is the level to watch out for support.

So, more or less, I expect expiry to happen within this range of 18,200 to 18,300 and short iron butterfly strategy can be initiated at 18,200-18,250. We can just sell at the money call in put and then we can just hedge it with 18,200 and 18,300 put in call respectively. And the same can be done with Bank Nifty.

It is just that it is not at the level right now wherein one can do this. But Nifty is at those levels so one can initiate short iron butterfly and trade non-directional strategies as of now because index are sideways to negative rather than attempting long-side directional strategies.