Optimism is back, finally

F&O OUTLOOK

The short-term correction seems to be finally over. If the Nifty holds on to its 4,250 levels, it should move to 4,400-4,500 where it will face strong resistance.

Technical analysts now predict that the benchmark indices will test new highs, and a sharp correction can happen only if the Nifty fails to hold on to the 4,250 levels.

The open interest positions in the Nifty put and call option show that the call option open interest for the September series contracts is built around a strike price of 4,400 (open interest increase by 3.48 lakh shares) and 4,500 (2.12 lakh shares). 

ROLLOVER IN KEY NIFTY STOCKS
	23-Jul-07	27-Aug-07
Infosys Tech	52.98	49.67
SBI	35.66	41.01
ICICI Bank	29.40	37.84
Larsen & Toubro	35.59	35.08
Bharti Airtel	36.34	34.51
BHEL	31.99	33.51
ONGC	31.31	32.20
RCOM	29.81	32.11
Wipro	36.82	31.73
TCS	32.79	28.38
ITC	26.34	24.75
Reliance Ind	32.77	23.88
Nifty	31.29	32.14

The put options open interest for the September series contracts is increasing at 4,200 levels (6.69 lakh shares). It is widely believed that derivatives players are typically wrong on the market and thus use contra-market indicators. In other words, the overwhelmingly buying calls are bearish while the put volumes at extreme levels are bullish.

The put/call ratio (PCR) of the Nifty open interest moved up from Friday's level of 1.18 to 1.25. The increase in the PCR means buying support at the current levels.

The PCR for the Nifty September series contract is much higher at 1.38, up from the Friday levels of 1.30. The rise in PCR in the September series contracts is largely because of healthy rollovers in Nifty put options.

The RSI has turned around from around oversold to normal. If the RSI is below 25, it means oversold positions while above 45 is considered to be a normal position.

RSI above 80, however, indicates overbought position. The five-day RSI is at 62 while the 14-day RSI is at 50. Both these are at normal levels.

The Nifty on Monday closed above 4,300 levels, which is the 20-day moving average levels. The market momentum now suggests that the index can see further rise from current levels and will test the 39-day moving average level of 4390.