F&O Buzzer: Persistent Systems sees short covering as stock recovers

The IT sector has been buzzing the entire week. Analysts are expecting some companies to report a slowdown in growth and traders have started positioning themselves for such a scenario.

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Persistent Systems saw a massive short buildup on January 13 as the stock price fell but open interest surged amid the rout in IT sector stocks. A short buildup is a bearish phenomenon that signals more selling may happen in future. However, lately some short covering is being seen.

Shares of most IT companies were trading lower and seeing a short build-up despite major companies managing to positively surprise the street in the Q3 result season, so far.

Candles represent futures prices. The red line shows resistance, while the blue curve is the spot price.

After opening, Persistent Systems made continuous red candles for the next hour before the price stabilised. The stock recovered a bit but was traded down about 0.2 percent in the spot market. Volumes also rose about twice the last two weeks’ average.

Open interest for Persistent System’s contracts rose 31 percent. On the options chain, 4,000 strike saw most call writing, emerging as the new hurdle for the stock. Put writing was seen at 3,800 strikes followed by some at 3,900 strikes.

Bars reflect the change in OI during the day. The red bars show call option OI and the green put option OI.

The IT sector has been buzzing the entire week. Analysts expect some companies to report a slowdown in growth and traders have started positioning themselves for such a scenario.

Disclaimer: Trading in futures and options markets is extremely risky. Traders and experts mentioned above may not be SEBI registered. Hence, trades they have taken should not be construed as investment or trading advice. Please consult a financial adviser before taking any trades.