Technical and derivatives analysts see the Nifty finding support at 15,500 level this week. If the Index manages to sustain above 15,800 then it may head higher for 16,300 levels, said analysts. The Nifty gained 0.3% last week to end at 15,752.05 amid continued selling by foreign investors.


Where is the Nifty headed?Nifty negated its formation of lower-highs of the last three weeks and bounced to 15,927 mark, but follow-up activity was missing at higher zones. Mechanical indicators are giving a bullish crossover which indicates for some bounce-back move in the coming sessions. Nifty has to hold above 15,735 zones for an up-move towards 16,000 and 16,161 zones whereas on the downside support is intact at 15,500 and 15,350 zones. July has historically positive track record but short positions with higher volatility are indicating speed breakers ahead.

What should investors do?
Investors can use this decline to add good quality stocks from auto, private banking, financial and consumption sectors, while traders are suggested to play with bounceback move with proper position sizing to deal with this volatile market. One can go with the Bull Call Spread by buying 15,750 Call and Selling 15,950 Call to play the bounce towards 16,000-16,161 zones. Stock specific we have positive stance in M&M, , McDowell, , , and , etc.


Where is the Nifty headed? On the weekly chart, Nifty has formed a small bearish candle with a long lower shadow indicating buying at lower levels. The chart pattern suggests if Nifty crosses and sustains above 15,800 it would witness buying which would lead the index towards 16,000-16,300 levels. Nifty has unfilled bearish gap area 15,886-16,172 which is likely to act as supply zone in the near term. However, if it breaks below 15,500 level it would witness selling which would take the index towards 15,300-15,200 levels. For the week, we expect Nifty to trade in the range of 16,200 to 15,500 with mixed bias. Nifty is still trading below its shortterm moving average of 20-DMA. The weekly strength indicator RSI (Relative Strength index) is moving downwards and is quoting below its reference line, indicating negative bias.

What should investors do?
Automobiles, FMCG, NBFC, cement and IT to show buying interest this week. One can focus on stocks like ITC, , TVS Motor, , , , and . Nifty in this weekly expiry has highest open interest on Call side at 16,000 strike, while on Put side it is at 15,500 — indicating a range between 16,000 and 15,500. We are suggesting the Iron Butterfly strategy for July 7 expiry, which involves selling one lot of Nifty 15,750 Call at Rs 153 and selling one lot of Nifty 15,750 Put at Rs 153 and simultaneously buying one lot of 16,100 Call at Rs 33 and buying one lot of 15,400 Put at Rs 47. Both risk and reward in this strategy are limited and the gains will be accrued between 16,000 on the upside and 15,500 on the downside. Maximum profit of Rs 11,300 will come if the Nifty closes/ expires at 15,750. If Nifty expiry close is above 15,976 or below 15,524 then maximum loss incurred will be Rs 6,200.


Where is the Nifty headed?
Nifty is bouncing back from an extremely oversold condition. Post expiry the Put/Call ratio based on open interest is rising as bulls try to take hold. On the other hand, FIIs continue to hold net short positions in index futures. Both point to a near-term technical rally on short covering. Nifty has strong support near 15,500 and should head towards 16,600 in the coming weeks.

What should investors do?
Among the sectors that can benefit most from a near-term bounce-back in risk assets is the IT sector. The weekly RSI was sub-30 last week which is the lowest reading since the start of the pandemic. A 10-15% upside in the Nifty IT index could be seen as it heads into the earnings season. On the other hand, avoid the oil and gas sector.

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