By Rajesh Palviya
Nifty started the week on a flat note and traded with extreme volatility on either side for most part of the week, however buying momentum pulled the index higher to close in green. Nifty closed at 17315 with a gain of 220 points on a weekly basis. On the weekly chart the index has formed a small bullish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction.
The chart pattern suggests that if Nifty crosses and sustains above 17500 level it would witness buying which would lead the index towards 17700-18000 levels. However if the index breaks below 17000 level it would witness selling which would take the index towards 16800-16500.For the week, we expect Nifty to trade in the range of 18000-16500 with mixed bias. The weekly strength indicator RSI is at the verge of crossover above its reference line indicating trend may change to positive.
Bank Nifty Outlook
Bank Nifty started the week with a downward gap and buying momentum led it close on a positive note. Bank Nifty closed at 39178 with a gain of 546 points on a weekly basis. On the weekly chart the index has formed a small Bullish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction.
The chart pattern suggests that if Bank Nifty crosses and sustains above 39500 level it would witness buying which would lead the index towards 39800-40200 levels. However if index breaks below 39000 level it would witness selling which would take the index towards 38800-38500. For the week, we expect Bank Nifty to trade in the range of 40200-38500 with mixed bias. The weekly strength indicator RSI is at the verge of crossover above its reference line indicating trend may change to positive.
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Sectors and stocks to focus this week
We expect Chemical, Pharma, Automobiles, FMCG and banks to do well this week. One can focus on stocks like Tata Chem, Deepak Nitrite, Cipla, Zydus Life, Maruti Suzuki India, Escorts, TVS Motors, Jubilant Foods, UBL, Tata Consumer, Bank of Baroda, Federal Bank, CSB Bank.
NSE Nifty 50 trading strategy for 13 Oct F&O expiry
The strategy we are suggesting for the weekly expiry scheduled on 13th October is a bearish strategy namely Put Ladder, which is an extension to the Put spread and to further bring down the cost of the strategy (Net premium) one more extra leg of OTM PUT is sold. Here traders need to buy one lot of Bank Nifty 39,000 PUT @ 335 & sell one lot each of 38,500 PUT @ 178 & one lot of 38,000 PUT @ 89. The maximum profit of Rs 10,800 will be attained at 38,500 levels, while strategy will start making loss below 38,000. The cost of the strategy involves outflow of Rs 1,700 which is the maximum loss if Bank Nifty closes, and remains above 38,900 levels on expiry, however any sharper movement on lower side could result in losses and hence it’s advisable to exit the strategy in total below 37,800-37,600.
(Rajesh Palviya, VP – Technical and Derivative Research, Axis Securities. Views expressed are the author’s own.)