Nifty 50 (22,929) and Nifty Financial institution (49,099) depreciated 2.7 per cent and a couple of.1 per cent respectively. The futures and choices (F&O) information of each indices present bearish indications.
Nifty 50
Nifty futures (February) (22,972) misplaced 2.7 per cent final week. Because the contract dropped, the cumulative Open Curiosity (OI) of Nifty futures went up by 8 per cent to 194 lakh contracts on Friday. This reveals contemporary quick build-up.
The bearishness is strengthened by the Put Name Ratio (PCR) of choices. For weekly and month-to-month expiry, the ratio stood at 0.6 and 0.8 respectively on Friday. Since individuals have offered extra calls in comparison with places, PCR is lower than 1. Merchants promote calls when their expectation is bearish.
Whereas the F&O numbers present a transparent bearish tilt, the chart of Nifty futures present that the assist at 22,940 stays legitimate. If the contract breaches this stage, it could actually decline to 22,800 after which probably to 22,400.
In case Nifty futures get well from the present stage, it could actually face resistance at 23,250 and 23,400. That mentioned, for the outlook to change into constructive, the contract ought to surpass 23,600. Resistance above this stage is at 23,840.
Technique: Keep out. Brief Nifty futures if it slips beneath the assist at 22,940. Place stop-loss at 23,250. When the contract falls to 22,700, revise the stop-loss to 23,000. Guide earnings at 22,400.
As an alternative of promoting futures one should buy a put choice. We propose going lengthy on 23000-put of February expiry on the prevailing value when Nifty futures breaks beneath 22,940. By then, the premium of the choice might be round ₹300. Goal and stop-loss may be ₹450 and ₹220 respectively. Put up initiating this place, revise the stop-loss to ₹300 when the premium goes as much as ₹400.
Nifty Financial institution
Nifty Financial institution futures (February) (49,288) recorded a lack of 2.1 per cent final week. Alongside was a rise in cumulative OI by 30 per cent to just about 41 lakh contracts. So, like in Nifty futures, Nifty Financial institution futures witnessed a brief build-up.
The PCR of February choices stood at practically 0.7, indicating significantly extra promoting of calls than places, a bearish indication.
Regardless that not a textbook definition of double backside chart set-up, Nifty Financial institution futures had confirmed this sample in early February, sending out a possible bullish development reversal sign. However it failed to increase the rally and has now dropped beneath the neckline (50,000).
Nevertheless, it managed to shut above a assist between 49,000 and 49,200. So, it’s crucial to observe the response of Financial institution Nifty futures to this assist band.
If there’s a restoration, which might carry the contract above 50,000, we would see an upswing to 51,500 within the quick time period. Alternatively, if it falls beneath 49,000, it could actually discover assist at 48,500. However a breach of this stage can set off one other leg of downtrend, probably to 47,000.
Technique: On the present juncture, we see some uncertainty with respect to the development. Merchants can keep out and might provoke commerce based mostly on which of the 2 keys ranges i.e., 48,500 or 50,000 is breached first.
