By Chandan Taparia
The Nifty50 index remained highly volatile throughout Mondays trading session, but recovered sharply by aroun d 200 points from its intraday low and immediate crucial support of 10,200.
It formed a Hammer candle on the daily scale and closed positive, after seeing weakness in last three sessions. The index has taken support at its rising support trend line formed by connecting its major swing lows of 6,825, 7,893 and 10,200 and also turning from its lower band of the rising channel as per the weekly scale.
Now, it has to hold above 10,300 to extend its bounce towards 10,420 and then 10,500 and 10,650 levels, while on the downside, 10,200 could act as an immediate support to arrest the decline of last five weeks.
On the options front, maximum Put open interest was at 10,000 followed by 10,500, while maximum Call OI was at 11,000 followed by 10,800. There was Put writing at 10,300 and 10,000 levels, while Call writing was seen at all the strike prices from 10,400 to 10,700. The Option band signified a hold of support, while upside hurdles could be seen at higher levels.
India VIX moved up 2.12 per cent to 20.15, but slipped from its intraday swing high of 21.77. Overall higher volatility suggests a bear grip, but a cool off in VIX with a topping out formation could form a short-term bottom for the market.
Bank Nifty formed a Bullish Harami or Inside Bar on the daily scale and showed positive divergence with the RSI indicating a short-term bounce if followup buying happens above 24,750. However it has been forming lower top and lower bottom on the weekly scale and needs to negate the same for a durable bottom formation and recovery. It has to cross and hold above 24,750 to extend its bounce towards 25,250 and then 25,500 levels, while on the downside, major support is seen at 24,250.
Nifty future closed positive with the gains of 0.33% at 10381. Longs were seen in IOC, HPCL, Indiabulls Housing Finance, Bata India, OIL and Kotak Bank while shorts were seen in Chennai Petroleum, Tata Elxsi, Voltas, DHFL, Chola Finance, Vedanta, Hind Zinc, M&M Finance.
(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)