Technical Analysis
Short positions which were built on #Nifty and #BankNifty on 26 February 2020 kept on getting built till 19 March 2020. Post that we are witnessing a continuous decline in OI. In layman terms, new positions were not added, and existing positions were cut. So, whosoever went short in the end of March 2020 has been getting out at bottom. Short Positions that started to build from 11700 as can be seen from chart below remains in control below 9200. We can also see that at lower levels, in the last three days rise, OI has started to buildup on the bullish side. Market is going up, OI is rising is a sign of strong market.
For BankNifty, bears are still in winning position below 21600 levels.
I actively look at Alligator channel for trend and it is still bearish with trend now turning sideways. If not sideways than atleast bear move is finishing. If price moves below 8660 and 19200, then it will leave the sideways territory and become bearish again.
RSI on Nifty and Bank Nifty is testing its long term trendline resistance. There are two possibilities. Nifty and Bank Nifty will break this resistance and will move upwards or it will be a failed resistance break or test in which case market will break down. 8684 seems to be the point on Nifty below which RSI will turn down and respect the trendline resistance in accordance with the larger trend. 19000 is the point for Bank Nifty. The larger trend amidst concern of #Coronavirus #Covid19 is still negative. So either we can start forming a bottom here, or we can continue the bearish trend. This can be the make or break points.
MACD has also gone positive for now even if it is a dead cat bounce. If we draw Fibonacci retracements, then 0.38% retracements is at around 9400 and 22000 for Nifty and Bank Nifty. Even the MFI indicator which is volume-based RSI is temporarily bullish.
Basic definition of trend is when price makes Higher Highs and Higher Lows (HHHL). Right now, on daily charts, over the 11 days period we have HHHL pattern formation. Same is also visible on Hourly Charts of Nifty whereas Bank Nifty is forming a triangle.
On Daily Charts, the HHHL formation is fast so can be deceiving right now.
Data Analysis
Nifty & BankNifty future had long buildup.
PCR after a long time has climbed to 1.48 and 1.3 respectively which is another bullish sign for weekly options.
For monthly options, PCR is at 1.29 and 1.14, respectively.
OI was added on 8000-9000 put strikes and 9000-10000 call strikes on weekly options. On monthly options, OI was shed on 8500-9300 Calls with addition on 8500 and 9000 put which shows temporarily bullishness in coming week. I am not expecting a V-up recovery, so it makes sense that data is mixed right now. We can see a bounce till 9500 levels.
On Bank Nifty, OI was added to all strikes but addition to put side is slightly more plus on monthly options we had a call unwinding at 20000 and 19000 levels. So here also we can see slight bullishness for the coming week. There is some unwinding at 18000 puts on monthly which I cannot understand for now.
Nifty Weekly
Nifty Monthly
Bank Nifty Weekly
Bank Nifty Monthly
Conclusion
If we can see bullishness that does not mean that we will not see intense sell offs. Trend is still bearish. So, I will be keeping a close watch on 8684 and 19000 levels to add shorts. Above these levels I will stay bullish.
Rohit Katwal