F&O Radar: Deploy Bull Call Spread in Nifty to benefit from sideways to positive outlook
On Wednesday, the index opened positively and traded sideways throughout the day, closing near the day's high with a gain of 94 points at 24,951.
Markets ended July on a positive note, with the Nifty showing resistance in reaching the 25,000 mark. The index gained 3% in July, largely supported by the Union Budget and a second consecutive month of buying by FIIs.
Analysts expect this momentum to continue, with sectoral rotation in play.
“The momentum indicators are in buy mode in the short-term indicating a possible breakout on the upside. The current consolidation appears to be in wave 4 on the hourly charts and wave 5 up seems to be pending on the upside. The target above 25,000 comes to 25100 to 25,200 levels whereas the immediate support is pegged at 24,900 and below that 24,800 levels,” said Jay Thakkar Vice President & Head of Derivatives and Quant Research, ICICI Securities.
The PCR is trading at 1.18 levels well above 1, which indicates bullishness.
Thakkar also noted that the index closed well above its max pain and modified max pain levels of 24,900 and 24,898, respectively, which is also a bullish sign. The 25,000 CE and 25,200 CE strikes have the highest open interest on an immediate basis, while there has been significant addition at the 24,900 PE levels. Thus, 24,900 serves as immediate support; if it holds, the outlook remains positive, but a breach could turn negative.
In this context, Jay Thakkar recommends deploying a Bull Call Spread in Nifty to capitalize on a sideways to bullish outlook.
