By Anand James
A 2.9% decline from last Friday’s high, incidentally also the record peak, has taken Sensex very close to the 50day SMA, encouraging us to look for reversal moves. Going into the expiry day, Call OI was the highest at 66800, which is 1200 points away from where OI was the highest last Friday, while Put OI was the highest at 65,000, which is 2500 points below where the put OI was seen the highest last Friday. This pointed either to extreme pessimism, which requires a course correction, or that the downtrend has more legs. We are inclined to place our bets on the former or at least on the prospects of a pause in the downtrend, having closed just below the 50day SMA. However the extent of upsides appear uncertain though.
With Nifty, we are within touching distance of the 19,550 objective set at the start of last week. The proximity of the 50day SMA at 19,626 lends credence to the prospects of a pause to the week-long downtrend, or potentially a reversal move that could aim for 19,956-80 as the initial objective. Alternatively, inability to float above 19,600 or reclaim the 20,030 mark on the bounce could signal resumption of downtrend aiming at 18,600. The prospects of the same are low, but a possibility nevertheless.
USDINR meanwhile changed direction after teasing to surge past the record peaks. However the rejection trades appear to have found buying interest from 82.78, which could rekindle buying interest. Favoured view however sees more swings on either side of 82.93 initially.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)
