F&O Radar| Deploy Bull Call Spread in Nifty to gain from upward bias
Nifty at new all-time high of 25,236 simply indicates momentum as it steps in uncharted territory. The upward momentum is evident specifically with a directional contribution from Pharma, Tech and Finance.
At present, the underperformance in Bank Nifty and other sectors make the current rally very specific in terms of outperformance from sectors like Finance, commodities, Pharma and tech.
“Market breadth also indicates stock specific action as the number of stocks above 10 MA drops from 75% to 56% while similar drop is seen in 20, 50 MA as well. Secondly, the RSI reading is strong at 95, so upward momentum may be seen with rotational play. Lastly, ADX(Velocity) indicates trend strength to be from there we may see some correction,” said Shrey Jain, Founder & CEO of SAS Online.
Resistance for Nifty on upside is at 25536 and 25610, so capped upside while support which was previously at 24730 is now shifted to 25080 and 24900, Jain added.
OI data points to the highest concentration in strikes of 25,500 – 25,700 while on the downside, it is at 25,200 and 25,000. So, a probable range on upside technically, is 25,500 to 25,610.
“While we suggest being cautious as we hit that limit for downside support at 25090 and 24900. The HV is very low at 5.72 hence we may see some volatility or whipsaws,” said Jain.
In such a scenario, Shrey Jain suggests deploying a Bull call spread given the upward shift in bias.
Bull Call Spread
A bull call spread is an options strategy used when a trader is betting that an asset will
