Currently, the underperformance of Bank Nifty and other sectors makes the current rally very specific in terms of outperformance of sectors like financials, commodities, pharma and technology.
“Market breadth also indicates stock-specific action as the number of stocks above the 10-MA drops from 75% to 56%, while a similar drop is also seen in the 20-MA and 50-MA. Secondly, the RSI reading is solid at 95, so upward momentum can be seen with a rotational play. Lastly, the ADX(Velocity) indicates trend strength “From there, we may see some correction,” said Shrey Jain, founder and CEO of SAS Online.
The resistance for Nifty’s upside is at 25536 and 25610, so the upside is limited, while the support which was earlier at 24730 has now moved to 25080 and 24900, Jain added.
The OI data points to the highest concentration at strikes of 25,500 to 25,700, while on the downside, it is at 25,200 and 25,000. Hence, a probable range on the upside technically is 25,500 to 25,610. “While we suggest to be cautious as we hit that downside support limit at 25,090 and 24,900. The HV is very low at 5.72, hence we may see some volatility or swings,” Jain said. In such a scenario, Shrey Jain suggests implementing a Bullish Option Buy Spread given the upward shift in bias.
Bullish Option Buy Spread
TO bull call The spread is a options strategy It is used when a trader bets that an asset will have a limited increase in price. The strategy uses two call options to create a range consisting of a lower strike price and an upper strike price.
(Prices as of August 30)
Below is the strategy results chart:
ETMarkets.com(Source: SAS Online)
(Disclaimer:The recommendations, suggestions, views and opinions of the experts are their own and do not represent the views of the Economic Times)
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