Bears may call the shots

F&O OUTLOOK

The Nifty closed above 4,775 on Friday, which has acted as stiff resistance during the week ended April 11. According to technical analysts, a convincing crossover of this level remains important to aim for 4,870.

The Nifty closed at 4,777 on Friday, which is above the 20 days' moving average (DMA) of 4,722. The technical target for the Nifty is 4,904, which is the 39 DMA.

The highlight of Friday's trading was heavy writing of puts at a strike price of 4,700, indicating strong support being built for the index around 4,700.

The open interest (OI) of put options at the 4,700 strike price accounts for 17 per cent of the total OI in put options, indicating strong support.

The put-call ratio (PCR) of the OI at the 4,700 strike price is also very high at 2.93 compared with a PCR of 1.24 in Nifty options, indicating excessive put writing at the 4,700 level.

However, bears have control over 4,800, 4,900 and 5,000 levels as 56 per cent of the OI in call options exists at the above-mentioned levels.

The PCR at 4,800 strike price, however, is at 0.94, indicating that bulls have been shifting their support level for the Nifty at 4,800. The PCR at 4,900 strike price is at 0.54, indicating excessive out-of-the-money call writing and hence bulls have to work hard to get past 4,900.

The resistance for the Nifty remains at 5,000 as it accounts for 25.3 per cent of the total OI in call options. The PCR at 5,000 is at 0.22, indicating that bears have a commanding position at 5,000.