Day trading guide for Monday’s market

Chandan Taparia, Motilal Oswal

Nifty outlook
Nifty had a gap-up opening on Friday, in tune with the global market, and continued gaining strength by heading towards a new lifetime high territory. After a small dip in the initial hour, the index recovered well throughout the day to close with a gain of around 150 points. It formed a bullish candle on the daily scale and has been making higher lows from the last three sessions. Now, it has to continue to hold above 13,600 to witness a fresh rally towards its new lifetime high of 13,850 and 14,000 zones. On the downside, major support exists at 13,500 and 13,333 levels.

Stocks (spot levels):

Derivatives
India VIX fell down by 2.60 per cent from 20.49 to 19.96 levels. Cooling down of volatility from higher zones have given support for a decent bounce back move. Now the volatility index has to hold below 19 for the bulls grip to continue. On the options front, Maximum Put OI was at 13,000 and 13,500 strike, while maximum Call OI was at 14,000 and 14,500 strike. Call writing was seen at 14,000 and 14,200 strike, while Put writing was seen at 13,700 and 13,600 strike. Options data suggested an immediate trading range in between 13,500 and 14,000.

Bank Nifty opened gap-up above 30,000 and continued its northward journey towards 30,500. The banking index settled the day with a gain of around 500 points. It formed a bullish candle on the daily scale, while a long lower shadow candle on the weekly scale indicated that declines are being bought. Now, it has to continue to hold above 30,200 zone to witness an up move towards 31,000 and 31,200 zones. On the downside, support exists at 30,000 and 29,800 zones.

Nifty: Options Strategy
Bull Call Spread: +13,750 CE – 13,900 CE (31st Dec, 2020)

Buy 1 lot of 13,750 call @ 112

Sell 1 lot of 13,900 call @ 46

Net premium paid: 66 points

Keep SL of net premium of 25 points: Risk of 41 points

Keep target of net premium of 140 points: Reward of 74 points

Rationale:
Nifty has been witnessing buying interest at every small decline and is now heading towards a new lifetime high territory.

India VIX has cooled down below 20 zones, which indicates tight bulls’ grip in the market.

Put Call Ratio has increased with Put writing at immediate strikes.

Forex Technical

Kishore Narne, Head – Currency & Commodities, MOFSL

USD/INR Status: Sideways-to-lower move looks possible in the short-term.

CMP: 73.55

Target Price: 73.20

Stop Loss: 74.10

Trade: Short-term trend looks bearish as long as the pair is trading below resistance at 74.05 level. Selling on rallies towards 73.80 is advised, targeting lower support at 73.20.

EUR/USD Status: The short-term trend remains positive

CMP: 1.2185

Target: 1.2275

Stop Loss: 1.2120

Trade: The pair is having short-term support near 1.2130 mark and a rally towards recent high at 1.2275 looks likely. Buying on dips towards 1.2160 is advised.