Nifty: Nifty could retrace back to 11,600-11,550 zone

Amit Trivedi, Technical Analyst – Institutional Equities, Yes Securities

Nifty retreats from 12,000, market breadth turns negative

Sharp decline from the 12,000 erased prior session’s gains, momentum on the downside picked up as it sustained below 11,800 mark. Appearance of a large bearish candle along with Nifty’s negative breadth indicates an immediate hurdle near 11,950-12,000 zone. The index is likely to digest its multi week up move and could retrace back to 11,600-11,550 zone.

Post Wednesday’s up move, Nifty Bank failed to provide positive follow-up through. Sharp throwback in today’s trade ensures a hurdle near 24,000. Immediate floor for Nifty Bank is placed near 22,500.

Stock options:
Infosys bear put spread

(Expiry: 29th October)

  • Buy 1100 Put near 30
  • Sell 1020 Put near 8
  • Current spread: 22
  • Target: 75
  • Stop loss: 4
  • Retracement back to 1,000 levels is likely, hence buying ATM and selling OTM option seems a prudent strategy to follow at current levels.

Pair trade:

Buy Tata Steel October Future near 373
Sell Hindalco October Future near 174

  • Current ratio : 2.14
  • Target on ratio: 2.34
  • Stop loss on ratio: 2.04
  • During the prior month’s decline, the ratio of Tata Steel vs Hindalco defended multi year support of 2.02 and currently it is gradually gaining traction. On standalone charts, Tata Steel is relatively holding ground, while Hindalco is hovering below hurdle zone.

Stock Futures:
Sell Kotak Bank October Future near 1310

  • Target: 1230
  • Stop loss: 1347
  • Multiple failed attempts to sustain above 1360 dragged the stock lower. Inability to sustain at current levels could pull the stock below 1250 zone.

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