“Our eyes are however on 24,900, the fibo retracement of the recent low-high, as long as above which, we could see a push towards 25390 or even 25,770 in an optimistic scenario,” he says in a chat with ETMarkets.
Edited excerpts:
How do you read last week’s consolidation in the market? Do you think Nifty is forming a solid support base around 24,700 levels and that any downside from hereon could be limited?
There are a few reversal patterns that are presently on the path to maturity that could avoid the present bounce back from fizzling out as a dead cat bounce. Our eyes are however on 24,900, the fibo retracement of the recent low-high, as long as above which, we could see a push towards 25,390 or even 25,770 in an optimistic scenario. While this is the favoured trajectory, we do not think 24,700 will defend against a repeat attack, in which case we could be heading to 24,370-23,900, especially as fewer rate cuts are now expected for the rest of the year from the Fed than earlier. That said with VIX slipping to the low 13s again suggesting that risk appetite is better than earlier. Hence, even though we fear 24900 could be threatened at some time during the week, the odds of a swift downside appear low.
Nifty Bank weekly expiries are going to be discontinued after a month. Given the banking index’s popularity, are you going to miss it?
Nifty Bank and Nifty weeklies cater to different types of traders. While Nifty is a broad market benchmark, Nifty Bank is a sectoral index and has the least number of constituents and a lower lot size making it the most volatile of the two. So those who have gotten used to the wild swings and multiple trading opportunities that such volatility presents, will certainly miss it, but isn’t that what SEBI intended in the first case.
For Nifty Bank addicts, do you think they will shift to monthly expiries or Sensex or Nifty weeklies?
Sensex appears the automatic alternative for the money presently tied 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 be some time before the volume profile and OI build-up through the week in Sensex matches up with that of Nifty Bank. Only time will tell.
What kind of impact do you think the move is going to have on option premiums as a result of the regulatory change?
Regulatory changes are not restricted to the discontinuation of some of the weeklies. Some of them, like removal of calendar spread advantage, increase in lot size, additional margins on expiry day, etc. could, on the face of it, deter some speculators, but they could also affect bid-ask spreads, especially on contracts on their expiry day. That said, the regulatory changes are to be implemented at once, with some being effective in 2025 only. This could hopefully avoid a knee-jerk impact.
Before RIL announces its result on Monday evening, how would you want to trade the stock in the morning?
Last week we were staring at the potential for a continued breakdown, especially if 2,720 were to give away. But a consolidation ensued, and 2720 refused to budge, with evident exhaustion in bearishness. This encourages us to play reversal moves on Monday with positive divergence seen in several oscillators. Call options far OTM strikes have also started showing rising OI pointing to a higher risk appetite than what was on play at the start of last week.
Trent was one of the biggest gainers in the Nifty50 pack in the week. Do you see chances of more upside momentum ahead?
Three days of penetration of the upper Bollinger band has refused to douse the upside momentum, encouraging us to expect more upsides. A bullish marubozu on weekly charts also points us in the same direction. However, they are more interested in hunting for bargains rather than chasing upsides, with 7,770 as the downside marker, even though there are no evident risks of an outright collapse lower.
Give us your top trading ideas of the week.
CASTROLIND (CMP: 227)
View – Buy
Target – 250
SL – 214
The stock has been moving within a rising trend channel since August 2023. The stock came off the channel resistance in August 2024 and looks to have turned around from the channel support of 222 this week forming a Hammer candlestick. We expect the stock to move towards 250 in the next few weeks. All longs may be protected with stop loss placed below 214 levels.
JAMNAAUTO (CMP: 118)
View – Buy
Target – 130
SL – 112
The stock has been moving within a downward-sloping trend channel and has bounced off the 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 strength to the reversal. All longs may be protected with stop loss placed below 112