F&O: Strong bear grip all over, refrain from going long now

By Chandan Taparia

The week started on a negative note on Monday, as Nifty opened with a huge downside gap on the back of a sharp selloff on the global bourses. The bears were aggressive from early trade and continued to drag the index lower as the session progressed.

Eventually, Nifty ended the session a tad below the 9,200 mark and formed a Bearish Marubozu kind of candle on the daily scale, indicating complete dominance of the bears throughout the session. The index moved within Friday’s body (open and close) and thus, formed a Harami pattern on the daily chart.


Considering the overall global market scenario, traders should refrain from taking long positions as all the global markets were in strong bear grip and all small bounces have been used as selling opportunities. As long as Nifty doesn’t close above its previous day’s high, the bears will have an upper hand in the market. At its current juncture, Nifty has key resistance placed at 9,600 and then 10,200 levels; while supports can be seen at 8,500 level.

On the options front, maximum Call open interest was at 12,000 and then 10,000 levels while maximum Put open interest was at 9,000 and then 9,500 levels. Open interest data in options lay scattered at various strike prices as many Put writers got trapped in the market fall and unwinding pressure kept the Street under pressure. The market saw Call writing at 10,000 and Put writing at 8,100 and 8,200 as the trade range slid lower. Options data indicated a shift in wider trading range to the 8,500-10,000 zone.

India VIX closed 14.39 per cent higher at 58.87. Higher VIX beyond 50 level suggested that volatile swings may continue in the market. Volatility has to cool down from current multiple-year high levels and only then will stability and smooth ride return to the market.

Bank Nifty opened with a gap down and continued its negative momentum throughout the day. It formed a bearish candle on the daily chart and closed around the 23,100 mark. After a sharp recovery in Friday’s session, follow-up buying was missing, which is a negative sign for the market. At the current juncture, there was no sign of trend reversal on the charts and, thus, traders are advised to remain cautious till the dust settles in the market.

Going forward, the immediate resistance for the index is placed at 24,100 and then 25,700 levels, while supports can be seen around 22,000 and 21,300 levels.

Nifty futures closed negative at 9,095 with a 8.10 per cent loss. Major shorts got built up on the counters of HDFC Life, Bandhan Bank, Equitas, ICICI Bank and Tata Steel.

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