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Nifty Taken Crucial Support - Trend Sideways

The Nifty 50 index has respected our Support Levels of 17950 - 18000 mark in today's trading session. There is heavy Call Writing with a PCR of around 0.6 indicating mild bearishness to sideways for this expiry.



If 18200 is breached and the index sustains, there could be massive short-covering which might push the index towards 18300 and 18350 levels. On the lower side, we expect 18000 to be respected for this month's expiry.



As per Open Interest Change data for today, maximum Puts unwound at 18200, and maximum Call Writing is seen around 18600. Maximum Put writing was seen in 17800. We expect the broad range to be traded between 17800 to 18600 in the coming days. This data too shows that the trend to remain slightly bearish with sideways moves in the coming days for this month's expiry.



Coming to technical analysis, we see that there is a downward channel-like formation on the index spot chart. A sustained move above 18200 can trap the bulls for this expiry. But as per data, given the heaviness of Call writing Nifty is to remain below 18300 and above 18000.


TRADE IDEA
Short 18300 CE and 18000 PE and hedge it with Longs 17900 PE and 18400 CE. This will need a capital of about 46000 and the maximum profit is 2560 and the maximum loss is 2440.
TRADE EXPECTATION
Target a 2% return on capital of about Rs 900.
STOP LOSS AND ADJUSTMENT
Exit CE positions when 18350 is breached. Exit PE positions if 17950 is breached.

- Pitanjal Dutta (pitanjal@duttanalytix.com)

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