Nifty may be inching higher, but the bulls face a crucial test at 24,775 before the index can revive its uptrend and target 25,100. Anand James, Chief Market Strategist at Geojit Investments, sees support emerging near 24,500, while derivatives positioning indicates that aggressive call writing could cap the upside and keep the index within the 24,400–24,800 range.
James also shares his outlook for Bank Nifty, explains how the closing auction session is changing derivatives trading, and assesses the prospects for Ather Energy and Siemens Energy India after their recent rallies.
Edited excerpts from a chat:
Nifty continued to inch upwards this week as well. What are the immediate support and resistance levels for Nifty this week? Is 24,500 the key support, with 24,775–25,000 acting as the resistance zone?
While the 10 day SMA at 24400 attracts prices down, 24500 appears to be the support from which bulls may attempt to regroup. Such an attempt, if successful, can take down 24775, which is essential for revival of uptrend with an initial objective of 25100. This is less expected though. Middle bollinger ban support is now at 24248, while key fibo support is at 24080.
What is the technical outlook for Bank Nifty, particularly after financial stocks came under pressure earlier in the week?
Bank Nifty remains range-bound between 57,300 and 58,300, with 57,300 acting as a key support and 58,300 as the immediate resistance. The index is holding above its rising trendline, while a bullish MACD crossover indicates improving short-term momentum.
Derivatives data presents a mixed picture. Around 70% of the near OTM call strikes in index constituents have seen fresh short additions, suggesting traders are capping upside. However, nearly 50% of stock futures have witnessed short covering, indicating easing bearish sentiment at the stock level. Additionally, fresh call writing across 57,800-58,600 in Bank Nifty highlights a strong resistance zone around 58,300-58,600, while put positions indicate short covering rather than fresh support creation.
Overall, Bank Nifty is likely to trade within the 57,300-58,300 range in the near term. A sustained move above 58,300 could trigger further short covering and strengthen the bullish outlook.
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What does the derivatives data - open interest, put-call ratio, futures positioning and implied volatility - indicate about the market’s likely trading range?
Nifty August weekly options positioning appears neutral to mildly bearish, with traders increasingly using puts for protecting downsides rather than creating fresh support. Significant OI additions at 24,500-24,600 PE strikes were accompanied by rising premiums, indicating put long additions rather than put writing. On the call side, sharp OI additions coupled with declining premiums at 24,550 CE, 24,600 CE, 24,700 CE and 24,800 CE point to aggressive call writing, reinforcing a strong resistance zone ahead for Nifty. The largest call concentration at 24,600 CE highlights it as the key level to watch, while substantial call OI at higher strikes suggests sellers are capping upside expectations. Additionally, put unwinding above 24,650 reflects limited confidence in sustaining higher levels.
The Put-Call Volume Ratio, which had been rising steadily since late July, has moved down from the previous peak of 1.15 and is now at 1.04, indicating that bullish sentiment has cooled somewhat. At the same time, Nifty VIX has fallen to its lowest level since February, suggesting that traders expect market swings to remain limited, pointing to a relatively calm market environment in the near term.
Overall, the positioning suggests a probable trading range of 24,400-24,800 and sentiment remaining cautious unless substantial call unwinding emerges.
The implementation of CAS led to chaos for derivative traders. How are you dealing with it? Does it require a change in trading strategy or do you think things will improve in the next few sessions?
Yes, this does require a fresh approach as to how you view the last 30 minutes, and not just as a mere change in how closing price is calculated. For one, continuous trading stops at 3:15 for the eligible stocks, so that is an early end to your normal trading.
Secondly, the large disparity between the equilibrium price and the final closing price in such stocks had led to large spikes in indices which had surprised traders last week. One of the fallout of this was option traders going in blind, post 3:15, without an underlying to guide through this period. That said, stability was seen on Friday, thanks to more auction participation and dissemination of CAS data, lessening uncertainty.
Ather Energy shares were among the top gainers this week. Where do you think the stock is headed now?
Four days of close near the upper bollinger band appears to have eased the upside momentum calling for a consolidation. However, the favoured view expects the downside attempts to be limited to 1400, followed by attempts to resume uptrend.
Siemens Energy India shares jumped 12% on Friday. How strong is this uptrend and can the buying continue on Monday?
Siemens’ uptrend is still in its nascent stage and is well poised to best the double top that had turned down prices in June. Downside markers for fresh entries may be placed near 3450.
