F&O: Trade setup, rising VIX signal Nifty weakness ahead

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F&O: Trade setup, rising VIX signal Nifty weakness ahead


Nifty opened gap down below the 14,900 level on Friday in line with negative global cues. It could not hold and cascaded throughout the day and touched a low of 14,467. The first day of March series F&O contracts traded deep in red and the session ended with a huge loss of more than 500 points. The index formed a strong bearish candle on the daily scale, indicating that the bears had a complete grip on the market throughout the session.

Technically, the index formed a Bearish Island Reversal Gap pattern on the daily time frame chart with gap up and gap down near the 15,008-15,065 zone in the last two sessions. Now, below 14,650 level, the index can see weakness till the 14,400-14,300 zone, while on the upside, hurdles are seen at 14,750 and 14,850 levels.

India VIX moved up sharply by 22.95% from 22.89 to 28.14. It touched an intraday high of 29.64 and hit the highest level in last 169 sessions since June 29, 2020. The surge in VIX has given the bears a tight grip on the market and it is likely to put pressure on the index in any bounce.

Since it is the beginning of a new series, options data lay scattered at different strike prices. On the option front, maximum Put OI stood at 14,000 followed by 13,500 levels, while maximum Call OI is seen at 16,000 followed by 16,500 levels. Options data suggested a wider trading range between 14,000 to 15,000 levels.

Bank Nifty opened gap down and witnessed a deep cut as it headed towards 34,650 level. Weakness across the Street swept the banking index and as a result it ended the day with massive loss of more than 1,700 points. It formed a strong bearish candle on the daily and weekly scale. Now till it remains below 35,500 level, weakness could be seen towards 34,000 and 33,333 levels, while on the upside a key hurdle exists at 36,000 level.

Nifty futures closed negative with a loss of 4% at 14,562 level. On the stocks front, the trade setup looked bullish setup in SAIL, Nalco, Tata Chemicals, Colgate Palmolive, BHEL, Escorts, Lupin and Tata Power but weak in RBL Bank, Berger Paint, Kotak Bank, Gail, M&M, Havells, Heromotoco, HDFC,

, Bajaj Finance, L&T, PVR, TechM, IGL, , UBL, TCS, Marico and ITC.

(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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