F&O: Surge in VIX, lower lows for fifth session send out weak signals

F&O: Surge in VIX, lower lows for fifth session send out weak signals

Nifty opened with gap up on Friday but could not sustain at higher levels. While the index remained rangebound in the initial half of the session, the second half saw a downfall, which made the index breach Thursday’s low point. It touched an intraday low of 13,596 and closed the session with a loss of around 180 points.

The index continued to form lower lows for the fifth session in a row. It formed a bearish candle on the daily scale and signaled that Nifty may continue to remain highly volatile ahead of the Union Budget 2021. As long as Nifty remains below 13,800 level, every bounce could be sold into and the index may see weakness till around 13,500 and 13,300 levels, while on the upside, the immediate hurdle exists at 13,800 and 14,000 levels.

India VIX moved up 4.33 per cent from 24.29 to 25.34 levels. A surge in volatility due to selling pressure and ahead of the Budget 2021 could keep the market volatile with limited upside.

Since, it is the beginning of new series, options data lay scattered at different strike prices. On the options front, maximum Put open interest stood at 14,000 level followed by 13,000, while maximum Call OI was seen at 15,000 followed by 14,500 levels. Options data suggested a wider trading range between 13,200 and 14,000/14,200 levels ahead of the Budget.

Bank Nifty opened with a gap up and remained highly volatile through the day. Wild swings could be seen in the banking stocks and the index closed the day with a gain of around 200 points. The index formed a bearish candle on the daily scale, as it closed lower than its opening level, but negated the formation of lower top and bottom in last four sessions.

Now if the index manages to hold above 30,500 level, then a bounce could be seen towards 31,000 and 31,250 levels while on the downside support exists at 30,000 and 29,700 levels.

Nifty futures closed in the negative with a loss of 0.91% at 13,719 level. The trade setup looked positive in , , , Colgate Palmolive, ICICI Bank, and Marico but weak in Maruti, Dr Reddy’s, Lupin, Amara Raja Battery, , IGL, Sun TV, Dabur, , and .

(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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