>Weekly Derivatives (ICICI Direct)

Technical Outlook:
• The Nifty has formed a bull candle after breaking out from last week’s inside day candle
• The levels of 2700 acted as strong support for the entire week
• On the upside, the Nifty is now facing resistance to the trend line joining highs of January 2009 (3141.80) and February 2009 (2969.75). Value of this trend line for the next week comes to 2800. The Nifty is sustaining above 2800. Therefore, it would be a bullish trigger and may target the 2860-2880 area
• On the downside, good support appears around 2,770-2750 levels
• We expect the Nifty to trade in the range of 2720–2860 levels for the coming week
• The resistance remains at 2830 and 2860, whereas supports exist around 2770, 2720 levels

Derivative Outlook
• The PCR-OI has risen from 1.40 levels to the 1.59 mark. This was on account of noteworthy addition of OI in the 2700, 2800 and 2900 Put options while significant unwinding was noticed in the 2500, 2600 and 2700 Call options. An addition of 70502, 71164 and 11938 contracts was witnessed in the 2700, 2800 and 2900 Puts while 10625 contracts got unwound in the 2500 Put. Huge Put buying at 2700 strike was seen in the Nifty for the first four sessions of the week. This Put buying was seen near the resistance zone of 2800 in Nifty. However, since the Nifty was constantly able to hold the 2770 mark on the downside, we saw some unwinding by Put buyers at 2700 in the last session. The 2700 Put base currently stands at 7.66 million shares and is likely to hold as a strong support for the Nifty on a closing basis in the coming week. A similar action was also visible in the 2600 Put option. The 2800 Put witnessed Put writing in the last two sessions of the week. We have observed sell straddle at 2900 in the last week. On the other hand, significant short covering by Call writers was seen in the 2600 and 2700 Call options during the week. However, some profit booking was seen in the 2600 and 2700 Calls in Friday’s session. We feel the market is likely to trade in the range of 2700 and 2900 for the expiry week. Hence, one can form ‘Sell Strangle’ within this range for the coming week

• The Nifty futures combined OI stands at 37.36 million shares wherein the March OI stands at 24.34 million shares and April OI stands at 12.43 million shares. Significant short covering was observed over the week in the Nifty March series, which declined by 4.32 million shares in OI. With the Nifty gaining by 3.23% during the week, we feel some long positions got added in the Nifty April series. The rise in the Nifty was mainly due to positive global cues throughout the week. We have seen it trading in the range of 2750 and 2835 during the week, where most of the shorts got covered near the 2770 mark whereas fresh shorts got added in April near 2830 mark. Also, the short rollovers of March were mainly in the range of 2800-2850. Hence, we feel the Nifty may continue to see selling pressure near 2850 levels while on the downside 2750 could continue to act as an intermediate support


To see full report: WEEKLY DERIVATIVES 230309