“However, our eyes are on 24,900, the Fibo retracement of the recent low-high, as long as we could see a push above that to 25390 or even 25,770 in an optimistic scenario,” he said, speaking to ETMarkets.
Edited excerpts:
How do you interpret last week’s consolidation in the market? Do you think Nifty forms a solid base around 24,700 levels and any downsides can be contained from here onwards?
There are a few reversal patterns currently on the path to adulthood that could prevent the current upswing from melting away like a dead cat. However, our eyes are on 24,900, the Fibo retracement of the recent low-high, as long as we could see a rise above that towards 25,390 or even 25,770 in an optimistic scenario. Although this is the favored route, we don’t think 24,700 will defend against a repeat attack. In that case, we could be heading for 24,370-23,900, especially since fewer Fed rate cuts are now expected for the rest of the year than previously. That said, as the VIX dropped to the low 13s, again suggesting risk appetite is better than before. Although we fear that 24900 could be threatened sometime this week, the chance of a rapid downward trend seems slim.
Nifty Bank’s weekly expirations will be stopped after a month. Given the popularity of the banking index, will you miss this?
Nifty Bank and Nifty weeklies target different types of traders. While Nifty is a broad market benchmark, Nifty Bank is a sectoral index with the least number of components and a smaller lot size, making it the more volatile of the two. So those who have gotten used to the wild swings and multiple trading opportunities that such volatility brings will definitely miss it, but isn’t that what SEBI meant in the first case.
Do you think Nifty Bank addicts will switch to monthly expirations or Sensex or Nifty weeklies?
Sensex seems to be the automatic alternative to the money currently linked to Nifty Bank weeklies as it is more similar to Nifty Bank than Nifty in terms of lot size, volatility and trading opportunities. However, it will take some time for the volume profile and OI build-up during the week at Sensex to match that of Nifty Bank. Only time will tell.
What impact do you think this measure will have on option premiums as a result of the change in regulations?
Changes in regulations are not limited to the discontinuation of some weeklies. Some of these, such as removing the calendar spread advantage, increasing lot size, additional margins at maturity, etc. might initially deter some speculators, but they can also affect bid-ask spreads, especially on contracts at their maturity. That said, the regulatory changes must be implemented all at once, with some not taking effect until 2025. Hopefully this can prevent a shocking impact.
How would you like to trade the stock in the morning before RIL announces its results on Monday evening?
Last week we were staring at the possibility of an ongoing crisis, especially if 2,720 were given away. But consolidation ensued and 2720 refused to budge, with clear exhaustion in bearishness. This encourages us to play reversal moves on Monday with positive divergence in several oscillators. Call options far OTM strikes are also showing rising OI, indicating higher risk appetite than early last week.
Trent was one of the biggest gainers in the Nifty50 pack this week. Do you see opportunities for more upside momentum?
Three days of upper Bollinger band penetration have refused to extinguish the upside momentum, encouraging us to expect more upside. A bullish marubozu on the weekly charts also points us in the same direction. However, they are more interested in looking for bargains than chasing upside, with 7,770 as a downside indicator even though there are no clear risks of an outright collapse lower.
Give us your best trading ideas of the week.
CASTROLINDE (CMP: 227)
View – Buy
Goal – 250
SL-214
The stock has been moving within an upward trend channel since August 2023. The stock left channel resistance in August 2024 and appears to have turned around from channel support at 222 this week, forming a Hammer candlestick. We expect the stock to move towards 250 in the coming weeks. All long positions can be protected with a stop loss placed below the 214 levels.
JAMNAAUTO (CMP: 118)
View – Buy
Goal – 130
SL-112
The stock has been moving within a downward sloping trend channel and bounced off channel support this week. We expect the stock to move towards the channel resistance of 126 and later towards 130 levels. The stock has formed a Hammer candle pattern indicating the strength of the reversal. All long positions can be protected with a stop loss below 112
