Nifty is seeing strong base buildup at 7,800

The Nifty50 managed to get past its crucial resistance level at 7,850 on Wednesday, and could very well test the 7,900-7,950 levels probably ahead of the New Year’s Day, if the current momentum continues. Options data suggest there is a strong base developing near the 7,800 level. Investors who want to go long can keep a stop loss around that level with a target of 7,950 on the upside, experts said. On Wednesday, Put OI at strike price 7,800 rose by 16.2 lakh contracts to 50.37 lakh. The total OI at the 7,800 Put is second highest after that at strike price 7,500, where total Put OI stands at 52.90 lakh contracts. This suggests a strong base buildup for the Nifty50 at the 7,800 level. For minute-by-minute market/stock updates, follow our Twitter handle @ETMarkets The maximum Call OI was placed at strike price 8,000 (75.33 lakh contracts), followed by strike 7,900 (57.05 lakh contracts). Some Call unwinding to the tune of 12.06 lakh contracts was seen at strike price 7,800. Nifty is seeing strong base buildup at 7,800 F&O watch: Nifty50 is seeing strong base buildup at 7,800
“Huge Put writing at strike price 7,800 will keep the index above the 7,800-7,777 zone, while unwinding at strike price 7,800 would create further scope for Nifty50 to head to higher levels,” said Chandan Taparia, Derivatives & Technical Analyst – Equity Research at Anand Rathi Financial Services. “However, Call writing at strike prices 7,900 and 8,000 would keep the upside barrier in the 7,950-8,000 zone. The strategy would be to buy on declines with a major support of 7,800-7,777 zone for an upward move towards 7,950 level,” he said. The Nifty50 December 2015 futures closed at 7,864 on Wednesday at a discount of 1.95 point over the spot closing of 7,866. It saw contraction of 0.13 million contracts, taking the total outstanding open interest to 17.71 million. Experts say for the market to move higher, Nifty50 has to hold above the 7,850 level to continue its upward move towards 7,920-7,950 levels, while if it holds below the 7,820 level, Nifty50 may fall towards the 7,770-7,750 zone, they said. Sandeep Wagle, Founder & CEO, Power My Wealth, said Nifty50 should test the 7,950-7,960 levels in the next few days, if not this week. “Yes, I would be bullish,” he said. Bank Nifty is looking weak on the charts. It took support near the 16,750 level, but failed to cross the previous day’s high of 16,937 and ended the day at its recent highest above 16,850, experts said. “We expect selling pressure in Bank Nifty at 17,000. In fact, the Put option at 17,000 has one of the highest open interest pointing to the possibility that bank Nifty could expire this series below 17,000,” said Karthik Rangappa, Vice-President, Education & Research, Zerodha. “Considering that the expiry is next week and the fact that bank Nifty is around 16,883, one can choose to write Call options at 17,100. Traders with larger risk appetite can even consider writing out-of-the-money call options on the SBI or ICICI Bank counters,” he said. Technically, Nifty50 is looking bullish on the charts. It has given a breakout of its trend line around the 7,820 level and is expected to test the next resistance at 7,880. “If it crosses this level and sustains above it, it can test the next level of 8,000, which is also its 50-day moving average. It is sustaining above the support of 7,760. If it crosses this level, a short-term correction can be expected,” said Vivek Gupta, CMT – Director Research, CapitalVia Global Research. “The RSI of Nifty50 is trading above the level of 50, which indicates further bullishness. Both K% and D% Moving averages of the stochastic indicator are above 50 band and are moving in the same direction, supporting the bullish view,” he said. F&O Trends: A rise in price along with a rise in open interest suggests long buildup. Here is a list of top stocks where long positions are building.
F&O watch: Nifty50 is seeing strong base buildup at 7,800 A fall in price along with a rise in open interest suggests short buildup. Here is a list of top stocks where short positions are building up.   source: economic times

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