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#39;Nifty may be stuck in 11,800-12,300 range again after strong recovery, as volatility cooled off#39;

February 10
01:28 2020

Chandan Taparia

Nifty index failed to surpass its previous day’s high and breached its winning streak of last four trading session as it closed a tad below 12,100 mark.

The index consolidated in range of 70 points for most part of the session and formed a Bearish Candle on daily scale.

However, we witnessed formation of a Bullish Candle on weekly scale as it recovered sharply from lower levels.

If we combine the price action of last two weeks, we are seeing a Bullish Piercing pattern on weekly chart.

At current juncture, supports are gradually shifting higher and now till the time, it holds above 12,050 level, we may see ongoing optimism towards 12,200 then 12,250 zones; while on the downside, major support is seen at 12,000 then 11,950 zones.

India VIX fell down by 18.35 percent from 16.84 to 13.75 levels on weekly basis. VIX fell down after the uptick of last five weeks post the Budget which gave comfort to Bulls to witness a remarkable recovery from its Budget day’s low.

On options front, maximum Put OI is at 12,000 followed by 11,500 strike while Maximum Call OI is at 12,500 followed by 12,400 strike. Put writing is seen at 11,600 then 11,800 strike while Call writing is seen at 12,300 followed by 12,500 strike. Option data indicates a wider trading range between 11,800 to 12,300 zones.

Bank Nifty witnessed strong recovery in the last week as it managed to recover the losses of the Budget week and formed a Bullish Engulfing pattern on weekly scale. It witnessed V shaped recovery in last week and reclaimed its 50 DEMA.

On the daily scale its formed an Inside Bar as it consolidated on the last session of the week but holding well to its immediate support of 31,000 zones. Now it has to continue to hold above 31,000 zones to witness an up move towards 31,750 zones while on the downside major support is seen at 30,800 then 30,500 levels.

Stock specific positive setup is seen in Tata Global, Divis Labs, L&T Finance, SRF, Pidilite Industries, Voltas, Aurobindo Pharma, Biocon, McDowell, etc. Index may stuck in range after a sharp dip and a strong recovery as volatility cooled off in the last week.

It may again get stuck in previous trading band of 11,800 to 12,300 zones and decisive range breakout only could start the next leg of rally.

(The author is Vice President, Analyst-Derivatives at Motilal Oswal Financial Services Limited.)

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