F&O: Lower highs show bears restricting market momentum
Nifty50 index has been falling from last three sessions and has started forming lower highs.
The Nifty50 index failed to surpass the 11,650 level on Tuesday and consolidated for most part of the session with sustained pressure at every small bounceback.
The index has been falling from last three sessions and has started forming lower highs, but it is still respecting its multiple support at 11,550 level from last 16 sessions.
The index formed a bearish candle followed by a Bearish Belt Hold pattern on the daily scale, which indicated that the bears are now forcing the market to restrict its momentum.
The index saw its lowest daily close in last 16 sessions as the bears appeared to have got a grip on it near major support zones. If Nifty fails to hold the 11,550 level, then a consolidation breakdown could take it lower towards the 11,500-11,480 zone while resistance is shifting lower towards the 11,666 level.
On the options front, maximum Put open interest stood at 11,500 followed by 11,000 levels while maximum Call OI was at 11,700 followed by 12,000 levels. There was a shift in congestion of Call open interest from strike price 12,000 to 11,700, which indicated that the upside is being restricted to the 11,666-11,700 zone.
Meaningful Call writing was seen at 11,700 followed by 11,600 levels, while there was Put writing at 11,500 followed by 11,600 levels. The option band signified a shift in trading range to the 11,500-11,700 zone.
India VIX moved up 2.47 per cent to 24.65 level even as it made a high of 26.31 during the session. VIX is at its highest level in 38 months since February 2016. A rising VIX indicates limited upside with volatile swings.
Bank Nifty remained volatile and drifted towards the 29,450 level as it failed to hold multiple supports at 29,650 level. It formed a Three Black Crows pattern on the daily scale, which implies supply at higher levels as it tumbled from its lifetime high of 30,669. Now as long as the index holds below 29,750 level, it could extend losses towards 29,250 and then 29,000 levels, while on the upside, a major hurdle is seen at 30,000.
Nifty futures closed in the negative at 11,590 with a loss of 0.24 per cent. There was long buildup in ONGC, Coal India, Bata India and ICICI Bank while shorts were seen in Bharti Infratel, Berger Paints, Bharti Airtel and GAIL.
(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)