F&O: Low volatility signals bullish stance, but Nifty gives bearish vibes

By Chandan Taparia

Nifty opened positive on Tuesday, but failed to hold above 10,400 level and drifted towards the 10,270 mark. It closed flat to negative near the 10,300 level, but formed a bearish candle as it settled below the opening mark. The index has been moving in a Rising Channel on the daily scale by connecting the swing lows of 7,511, 9,004, 9,544, 9,845 and 10,250 levels.

It has been moving between 10,200 and 10,400 level since last four sessions, where every dip has been bought into, but followup was missing. Now, the index has to hold above 10,333 level to witness any up-move towards 10,400 and then 10,555 levels, while on the downside immediate support is seen in the 10,200 – 10,180 zone.

India VIX moved up marginally by 0.72 per cent to 29.11 level. However, overall lower volatility suggests a bullish stance and emergence of multiple supports at every decline.

On the options front, maximum Put open interest stood at 10,000 followed by 9,000 levels, while maximum Call OI was at 11,500 followed by strike price 11,000. There was Call writing at strike price 11,000 and 10,500 while Put writing is seen at strike prices 10,000 and 9,500. Options data suggested a wider trading range between 9,800 and 10,800 levels.

Bank Nifty opened positive, but failed to hold above 21,650 level and fell towards the 21,212 mark. It closed flat and has been moving between 20,900 and 21,800 levels since last four sessions. It is respecting its 50-DEMA, but the absence of follow-up action is taking it back to support level. Now, immediate support exists at 21,000 and then 20,800 levels, while on the upside hurdles are seen at 21,800 and then 22,000 levels.

Nifty futures closed flat at 10,254 level. There was positive trade setup in stocks like ACC, MFSL, MRF, Ambuja Cement, Shree Cement, Maruti, Nestle, Britannia, Marico while the structures looked weak in RBL Bank, PVR, Indiabulls Housing, Ashok Leyland and IndiGo.

(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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