market analysis: F&O: Nifty forms lower high, but rising Put-Call ratio holds out hope

Nifty opened gap down on Friday, but partially filled a pending gap made on February 2, 2021, and found support at the 14,350 mark. Even though the index moved in a range in the initial part of the session, the second half saw a strong positive momentum, which took the index towards the 14,800 mark. Nifty formed a strong bullish candle on the daily scale and closed the day with the handsome gain of around 185 points.

The index formed a Bullish Piercing Line pattern on the daily scale and again reclaimed its 50-day EMA. However, it continued to form lower highs, but closed positive to end the losing streak of last five sessions.

Now, it has to decisively hold above 14,700 level to witness a bounce towards 14,900 and the 15,000 levels, while on the downside immediate support exists at 14,600 and then 14,450 levels.

India VIX slipped marginally by 0.46% from 20.08 to 19.98 levels. VIX needs to cool down below 20 level for the bullish grip to continue and smoothen the move in the market. A lower VIX with a rising Put-Call Ratio indicate that the bulls may get some stability after losing ground over the past few sessions.

On the options front, maximum Put Open Interest stood at 14,500 level followed by 14,000, while maximum Call OI was at 16,000 followed by 15,500. There was Call writing at 15,500 and 15,600 levels, while Put writing was seen at 14,500 and 14,400 levels. Options data suggested a wider trading range between 14,350 and 15,000 levels.

Bank Nifty opened with a gap down, but the bulls were able to show strength and pulled the index above the 34,000 mark. It concluded the session with a gain of around 300 points. However, it has been underperforming Nifty for the last few sessions. It formed a bullish candle on the daily scale after a series of weak sessions and has to now negate the formation of lower highs of last five sessions to trigger short covering. The index needs to hold above 34,250 level to witness a bounce towards 35,000 level, while on the downside support exists at 33,500 and 33,333 levels.

Nifty futures closed positive at 14,748 level with 1.18% gains. Among specific stocks, the trade setup looked bullish in M&M Financial, Tata Chemicals, Chola Finance, Cummins India, , JSW Steel, HUL, Shriram Finance, , Tata Steel, RIL, Concor, , Pidilite Industries and but weak in IndiGo, PVR, Motherson Sumi and Petronet LNG.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)