F&O: Series of negative divergence on RSI doesn’t bode well for bulls

Nifty opened negative and continued its negative momentum for the second consecutive session on Tuesday. It formed a Bearish Candle, as It failed to hold above 12,200 mark and corrected towards the 12,162 mark. The ongoing profit booking started from the strong hurdle of the Rising Trendline on the weekly chart and now the index is approaching the previous gap area between 12,044 and 12,130 levels.

We also witnessed a series of negative divergence of the RSI oscillator on the daily scale, which doesn’t bode well for the bulls. Going forward, Nifty’s immediate support is placed in the 12,130-12,050 zone. While the immediate resistance for Nifty is now shifting lower to 12,250 level, the medium-term resistance is placed in the 12,400-12,430 zone.

On the options front, maximum Put open interest was at 12,000 followed by 12,200 levels, while maximum Call OI was at 12,500 followed by 12,300 levels. A good amount of writing was seen in Call options at 12,300 and 12,500, while marginal Put unwinding was seen at strike price 12,200. Options data indicated a trading range between 12,000 and 12,500 levels.

India VIX moved up 2.94 per cent to 15.86 level. There is a spike in volatility due to the ongoing earnings season and the forthcoming Union Budget 2020.

Bank Nifty opened on a negative note and respected its major support in the 30,800 – 30,900 zone. It consolidated just above the support band and formed a Doji candle on the daily chart, indicating indecisiveness among the market participants. Now, the bulls have to hold above 30,800 level for a pullback move. In the coming days, as it breaches the 30,800 level, we may see a further drop towards 30,500 and then 30,300 levels. On the flipside, immediate resistance is placed at 31,500 and then 32,000 levels.

Nifty futures closed negative at 12,200 with a loss of 0.51 per cent. Long buildup was seen in LIC Housing Finance, ZEEL, RBL Bank, Jindal Steel, Aurobindo Pharma; while shorts were seen in PFC, IOC, Tata Steel, BHEL and REC.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations.)