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Continuous call writing at 12,000 strike suggests Nifty upside is capped

November 16
10:29 2019

Nilesh Ramesh Jain

Nifty remained volatile throughout the week in a wider trading range from 11,800-12,000 levels and faced stiff resistance at 12,000-mark which has been acting as a crucial resistance zone.

On the weekly scale, Nifty formed Doji candles for the continuous two weeks, indicating that bulls and bears both are making attempts to drag the index on either side.

However, the short-term trend for Nifty continues to be rangebound with a slight negative bias. We expect a soft start on Monday with some rangebound trade. As long as it trades below 12,050 levels we expect some consolidation in the range of 11,800-12,000.

On the derivative front, put writers were active in 11,900, 11,800 and 11,700 strikes where maximum open interest concentration is placed at 11,800 strike.

Continuous call writing at 12,000 strike in the weekly as well as monthly expiry is hinting that upside is capped.

Bank Nifty outperformed in the previous week and sustained its positive momentum for the 6th consecutive week even after some profit booking being seen in the Nifty index.

Now, the overall structure still looks positive towards 31,500 and 31,700 where immediate support is placed at 30,300.

The weekly MACD is well in the buy mode and its trading above the zero reference line which is positive for the bulls in the short to medium term.

For the Nifty index to reclaim its positive momentum, Bank Nifty has to continue with its positive momentum.

Kotak Mahindra Bank had provided breakout from its downward sloping trend line on the weekly scale and is moving again after retesting the same levels. Thus the overall structure works in the favour of the bulls.

One can expect the rally to move towards its immediate resistance at Rs 1,684 then Rs 1,720 level, while on the downside Rs 1,580 will act as important support zone.

(The author is Derivative and Technical Analyst at Anand Rathi)

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