F&O Tracker: The tide is turning
Reversal patterns emerge in Nifty 50 whereas Nifty Bank is testing a crucial barrier
The Nifty 50 index experienced a significant 2.8% increase last week, marking the largest weekly gain since April, while the Nifty Bank index rose by 1.1%. This positive momentum has persisted for two consecutive weeks, signaling a near-term bullish outlook. Analyzing the futures contracts, Nifty (Oct) futures surged 2.2% last week, although Open Interest (OI) declined by 11% to 170 lakh contracts.
This price rally coupled with a declining OI suggests short covering. The Put Call Ratio (PCR) for October monthly options also showed a slight upward movement, indicating a shift in sentiment towards bullishness as traders sold more put options compared to calls. The chart formed a morning star pattern, further supporting a potential trend reversal, with the contract surpassing the 21-day moving average.
However, a minor correction to the 22,850-23,000 price band could occur before the index resumes its upward trajectory towards 23,600. If the contract falls below the support level of 22,850, the bears could regain control, leading to a decline to 22,600 and potentially 22,250. Overall, the derivatives data and chart patterns suggest a positive outlook for Nifty futures.
Traders are advised to buy Nifty (Oct) futures if the index dips to 22,900, placing a stop-loss at 22,550 and taking profits at 23,580. Conversely, if the contract rises above 23,250 without a correction, fresh long positions can be initiated with a stop-loss at 23,050 and profits booked at 23,580. In the case of Nifty Bank futures, a similar pattern of short covering emerged, with a 0.8% increase last week and a 3% decline in OI.
The PCR for October Bank futures also increased, indicating positive sentiment. However, the chart has yet to confirm a breakout above the 56,000 level, which is crucial for a further rally to 57,000. A breakout of this level could lead to a significant upswing, but a breakdown below 55,000 could intensify the sell-off. Traders are advised to go long after the contract breaks out of 56,000 with a stop-loss at 55,300, and take profits at 57,000.
Alternatively, if the contract moderates to 55,400, fresh buy positions can be initiated with a stop-loss at 54,700 and profits taken at 57,000.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
