Nifty has sold off below its 200-EMA - Karvy

The Nifty opened on a positive note last week around 5700 levels and touched 5750 levels. However it could not sustain at higher levels and sold off below the 200-EMA through the end of the week. The index tested the 5530 mark and closed at its lowest levels in over six months. Frontline stocks witnessed heavy selling pressure as the Nifty slipped below its 200-EMA after having hovered around it for a couple of trading sessions. The market closed in the red, losing 2.28% W/W.

On the F&O front, the overall market open interest (OI) ended at Rs1,00,883 crore. The Index has a total OI of Rs 11,641 crore in futures and Rs 56,888 crore in options. The Nifty added OI of 49.99% W/W. The cost-of-carry fell from 7.27% to 6.18%.

For the April series, the basis decreased to a premium of 18.80 points from 31.70 points premium over the week. For the May series, the premium fell to 41.25 points from 50.30 points. The implied volatility (IV) of calls rose on Thursday to close at 15.88% from 15.96% last week, while that for put options fell marginally to 15.63% from 15.36%. Overall market cost-of-carry increased to 7.02% from 6.75% last week on the back of addition in open interest of 7.74% W/W.

On the technical front, the Nifty has sold off below its 200-EMA and is likely to head towards it next crucial support zone of 5400-5430. It is likely to face selling pressure on every bounce to 5650-5700 zone, above which one can expect a short term reversal in trend. It can come under intense selling pressure if global markets start their correction which is overdue.

Nifty Directional: Sell Nifty April futures @ 5580-5600; average: 5640; stop loss: 5680; target: 5430-5450; timeframe: 1 week.

Nifty Covered Put: Sell one Nifty Apr futures @ 5580-5600 and sell one Nifty Apr 5500 PE @ 50-52; BEP: 5530; max profit: Rs.6,500; max loss: unlimited above BEP; stop loss : 5650 (spot).

Source : Equity Bulls

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