F&O Watch: Bank stocks crack under pressure; time to take calculated risks

By Chandan Taparia

NSE benchmark Nifty50 failed to surpass its immediate hurdle of 9,450, and corrected towards 9,370 during the session. It formed a bearish candle, similar to a "Bearish Belt Hold" candle, on the daily chart after breaking the previous week's low of 9,390.

If it sustains below 9,380, then selling pressure could drag the index towards 9,350 and 9,320 levels, while on the upside immediate hurdles are seen at 9,450 and 9,480 levels.

The index has formed lower highs over the last two sessions and closed below its 13-DEMA with negative signal from RSI indicator.

The index closed near to its rising weekly support trend line by connecting the lows of 7,893 and 9,130 levels. If it holds below 9,380, then a decisive breach of trend line could put some pressure on the bulls.

On the option front, maximum Put OI is at strike price 9,300 followed by strike price 9,400. Meanwhile, maximum Call OI is at strike price 9,500 followed by strike price 9,600.

We have seen significant Call writing at strike price 9,400, which is restricting its upside move till 9,450, while fresh Put writing at strike price 9,350 is likely to hold the market on declines.

Bank Nifty continued its weakness for the second consecutive session and corrected towards 22,500. It failed to surpass 22,750 which is now likely to act as an immediate hurdle.

On the downside, a hold below 22,550 may drag the index towards 22,250. It formed a “Double Top” pattern on the daily chart as it made two daily highs of 22,977 and 22,978 in the last week. If it sustains below 22,550 level, then it will confirm this negative formation which could even put more pressure to this rate-sensitive index.

India VIX moved up sharply by 8.95 per cent at 12.20. If VIX holds above 12.50, then short-term weakness could be seen in the market. Traders are advised to take calculated risks for over-leveraged positions.

Longs were added in selective IT and auto stocks, while fresh shorts were seen in pharma and banking stocks.

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