Markets lack directional view

F&O OUTLOOK

Except for momentum stalling for the time being, markets are suffering from a lack of directional view. There are high chances of traders getting whipsawed on the long or short side.

A trader is whipsawed if he or she buys just before prices fall or sells just before prices rise. This term is also used in technical analysis referring to misleading signals.

There was a good amount of position building in call options, especially at-the-money strikes like 5100 and 5300. Meanwhile, call writing was seen at out-of-the-money call at 5400 strikes. This indicates that the Nifty might hold on to the current levels, while the upside resistance is at 5400 levels.

Puts saw a drop in open interest (OI) as bears booked profits. The Nifty PCR has dropped further to 0.90 (from 0.91) indicating continuation of oversold positions.

The bears were seen writing in the money for puts of January expiry near 5000-5300 strikes, indicating that the Nifty may close above 5300 on the day of expiry.

Range-bound trading during the last five days points to a drop in upward momentum. The markets are approaching the 14-day RSI resistance of 38 and, hence, upside is limited.

The Nifty touched an intra-day high of 5393 but failed to cross Friday's high of 5999.65 on fresh shorts. Modest buying was seen at lower levels, with Nifty February futures contracts adding Rs 3,409 crore in OI.

February stock futures added Rs 7,244 crore in OI. The February futures witnessed 40.2 per cent increase in OI to 18.44 million shares.