No major support levels in sight for Nifty - The Economic Times

http://economictimes.indiatimes.com/articleshow/8212724.cms?prtpage=1

Tue, May 10, 2011 | Updated 11.33AM IST

10 MAY, 2011, 05.22AM IST,

No major support levels in sight for Nifty

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The outlook for the Nifty remains negative because there are no major support levels for Nifty. The Nifty open interest put-call ratio is below the crucial support level of 1.2, and it is at 0.98. The volume put-call ratio is also weak at 0.81. The Nifty 5500, 5600 and 5700 strike price call options shed open interest, suggesting lack of confidence among investors to create fresh long positions. On the Nifty put option segment the open interest positions in the money and at-themoney options declined, indicating that sideways trend will remain at least in the short term. Since the market lacks fresh triggers, traders are using higher prices to create short positions. For the Nifty 5633 (50-day simple moving average) will act as a major hurdle, above this 5678 (100-day simple moving average) and 5750 (200-day simple moving average) will act as major resistance levels. With the current market scenario it is difficult for the Nifty to move above these major resistance levels. On the other hand, a move below 5490 can cause tremendous selling pressure also. Selling straddles is riskier because the Nifty implied volatility can start moving up from the current levels. A bear spread with call for the Nifty is the most suitable strategy for the Nifty. One can sell 5400 May call option at Rs 190 and buy 5700 May call option at Rs 37. The investor can gain maximum profit Rs 7,650 if Nifty closes at 5400 on expiry and his maximum loss will be of Rs 7,350 if Nifty closes above 5700 one expiry. The investor's break even point will be at 5553. On the stock futures segment, HUL attracted buying interest and it is likely to move above Rs 290. The open interest position is very strong, indicating positive outlook. Automobile stocks like Maruti and Mahindra and Mahindra clocked higher open interest, suggesting moderate built-up of short positions. Investors with short-term trading perspective can buy 1050 ICICI Bank put options for a holding period of two days. Alex Mathews, Head-Research, Geojit BNP Paribas Financial Services

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