Strong PUT writing shows bulls entering the Street and the phenomenon is well supported by CALL writers who are exiting which indicates that market bears are moving out, Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities said. PUT writers aggressively built positions at 21,500 Strike in Nifty on Thursday, he said.
Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research, SBI Securities on how one should trade stocks that were in focus in the previous trading sessions based on derivative and technical data:
Axis Bank shows strength with double bottom breakout
On December 4, 2023, Axis Bank’s stock reached a peak at 1151, followed by a throwback period. During this throwback, the stock formed an Adam and Adam Double Bottom pattern near a crucial support zone. This support zone was defined by the 50-day Exponential Moving Average (EMA) and the 38.2% Fibonacci retracement level of the preceding upward rally (980-1151).
On Thursday, the stock exhibited a breakout from the neckline of the Double Bottom pattern on the daily scale. This breakout was accompanied by a relatively higher trading volume. Simultaneously, the Positive Directional Indicator (+DI) surged above the Average Directional Index (ADX), and both are on an upward trajectory, signifying a notable increase in strength. The daily Relative Strength Index (RSI) surpassed the 60 mark for the first time in nine trading sessions, and the daily Stochastic indicator also gave a bullish crossover. These indicators collectively suggest a strengthening trend in the stock.
The derivative data clearly signals significant short covering, with a 2.16% surge observed in the December series future. Meanwhile, there is a nearly 1% decline in the cumulative Open Interest (OI) across the current, next, and far series. This data suggests a distinct trend of unwinding short positions, providing insight into a potential shift in sentiment.
There is a notable concentration of CALL open interest at the 1150 strike, followed by the 1200 strike. While significant open interest on the put side is observed at the 1100 strike. Talking about the option chains, from 1160 to 1130 CE strikes have witnessed a long build-up. While, on the put side, from 1140 to 1090 strikes have witnessed put writing. This indicates bullish momentum in the stock.Hence, we recommend accumulating the stock in the zone of Rs 1125-1115 with a stop loss of Rs 1090. On the upside, it is likely to test the level of Rs 1180, followed by 1210 in the short-term.
Oberoi Realty gives trendline breakout
The Nifty Realty index experienced a notable uptick of almost 7%, showcasing a robust performance compared to major indices. All constituents within the Nifty Realty index concluded with positive gains.
Oberoi Realty, a prominent stock in this sector, demonstrated a significant breakthrough by surpassing a horizontal trendline on a daily scale. This breakout was accompanied by a noteworthy surge in trading volume, reaching more than twice the 50-day average volume. Thursday’s total volume of 20.14 lakh far exceeded the current 50-day average volume of 9 lakh. Furthermore, the stock exhibited a substantial bullish candle on the breakout day, further reinforcing the strength of this upward movement.
As the stock is trading at an all-time high, all the moving averages and momentum indicator-based setups are suggesting further strength in the stock. The daily and weekly RSI is in a super bullish zone. The trend strength indicator, ADX is above 20 and it is on a rising trajectory.
On the derivative front, the January series future has surged by 4.78%. The cumulative OI of current, next and far series has surged by nearly 2%, which clearly indicates an overall long build-up. A significant concentration of CALL open interest is evident at the 1600 strike, while substantial open interest on the put side is concentrated at the 1500 strike. Delving into the options chain, there has been a discernible accumulation of long positions from 1520 to 1560 CALL strikes. Conversely, on the put side, there is noteworthy put writing observed from 1550 to 1480 strikes. This indicates bullish momentum in the stock.
Taking into account the aforementioned factors, there is a likelihood that the stock will exhibit outperformance in the upcoming trading sessions. The anticipated upward movement could lead to testing the levels of Rs 1610 initially, with a subsequent target of Rs 1640 in the short term. It is advisable to maintain a closing basis stop loss at Rs 1480 to manage potential risks.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)