F&O: Volatility needs to cool down for Nifty to continue with bullish bias

F&O: Volatility needs to cool down for Nifty to continue with bullish bias

Nifty opened positive on Wednesday, but could not sustain at higher levels and turned quite volatile for most part of the day. It touched yet another lifetime high of 14,244 in the initial hour, but moved southward thereafter and breached Tuesday’s low. The index again witnessed some recovery in the last hour of trade before finally closing the session around 50 points lower.

The index formed a bearish candle on the daily scale, but continued to form higher highs for the 10th consecutive session. Now, it has to hold above 14,050 level to witness a fresh rally towards 14,400 and then 14,500 levels, while on the downside, major support exists at 14,000 and 13,900 levels.

India VIX moved up 2.61 per cent from 20.46 to 20.99 level. Volatility needs to cool down below 20 level to support the bullish market setup and fuel the next rally with a higher market base.

On the options front, maximum Put open interest stood at 13,000 followed by 13,500 levels, while maximum Call OI stood at 14,000 followed by 14,500 levels. There was minor Call writing at strike prices 14,200 and 14,500, while Put writing was seen at 13,800 and 13,500 levels. Options data suggested a wider trading range between 13,700 and 14,500 levels, while the immediate trading range stood between 14,000 and 14,400 levels.

Bank Nifty opened positive, but failed to surpass the 32,000 mark and moved in a broader range with support at 31,500 level. It outperformed Nifty and saw the highest daily close in last 244 sessions. The index formed a small-bodied Doji candle on the daily scale. It now has to hold above 31,500 level to witness a bounce towards 32,000 and the 32,500 levels, while on the downside support exists at 31,200 and 31,000 levels.

Nifty futures closed negative at 14,175 level with 0.30%. The trade setup looked positive in Shriram Transport , Vedanta, IDFC First Bank, Concor, Powergrid, IGL, Hindalco, Gail, Bata India, Voltas, UBL, MGL, Grasim, Ultratech Cement, Bharti Airtel, ICICI Bank, Havells and L&T but weak in ITC, RIL, PEL, Bajaj Finance, Escorts and Dabur.

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

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