F&O Manual | Indices hit record highs; short-covering rally may propel Nifty to 22,800

The Nifty and the Bank Nifty scaled their new all-time highs of  22,673 and 48,666 by mid-day on April 8. On the daily charts, the benchmark Nifty formed an inside bar pattern on Friday, implying that any move above Friday’s high of 22,620 will lead to a short-covering rally of up to 22,800.
At 12:37pm, the Sensex was up 535.36 points or 0.72 percent at 74,783.58, and the Nifty was up 159.30 points or 0.71 percent at 22,673.00. About 1,826 shares advanced, 1,526 declined, and 103 stayed unchanged.

Bars in red indicate the change in open interest (OI) of call writers, while the green bars show the change in OI of put writers

Options data suggests that crucial support is formed at 22,600 levels with heavy put writing. ” On the daily charts, Nifty formed an inside bar pattern on Friday implies any move above Friday’s high of 22,620 will lead to a short covering rally up to 22,800. Also a close above 22,530 resistance will strengthen the bullish structure for the mentioned upside targets of 22,800-23,000,” Avani Bhatt, senior vice-president of derivative research at JM financial, said.

Also read: Option strategy of the day | Bullish momentum continues in Bharat Electronics, buy 230 call option

Avani recommends a Seagull Strategy for Nifty 10th April weekly expiry.

Buy 20700 CE at 70-75
Sell 20800 CE at 35-50
Sell 20500 PE at 35-40

Target – 60-70 points
Stop loss below 22400 spot

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