“These two factors are a bit scary. It means that a slightly favorable election result can lead to long losses on margin calls, and the market can go down to 22,000-21,500. On the other hand, a better-than-expected result can lead FIIs to aggressively short cover, that could take the Nifty to 23,000-23,500,” said Rupak De, Senior Technical Analyst at LKP Securities.
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Edited excerpt from the conversation:
Good rollovers increased by 72% in the May series and there were short positions exceeding 3 lakh contracts. What kind of inferences can be drawn from the rollover data?
Rollover to the June series is more at 72% compared to the average of three months before 69%, with good closing expiration more or less flat. However, the FII long-short ratio stood at a multi-year high of 87% shorts in index futures, compounded by heavy selling in the cash market. On the other hand, retail investors hold very long positions. Both of these factors are a bit scary. That means a slightly favorable election result could lead to long losses in margin calls, and the market could drop to 22,000-21,500. On the other hand, better-than-expected results could prompt FIIs to aggressively short cover, which could take the Nifty to 23,000-23,500.
Do you think ‘Abki baar 24,000’ is possible this week if BJP wins more than 320 seats?
A good result for the BJP is likely to take the index on a wild ride to 23,500. However, at this point, 24,000 seems a bit unlikely, at least in 4-5 trading sessions.
How should F&O traders position themselves to trade on Monday and Tuesday as the polls come out and the actual results will affect the market on those two days?
Due to high volatility, which has led to an increase in option premiums, a long-only options strategy may not be advisable. However, a spread strategy, where the maximum risk is limited and offers a good risk-reward ratio, can be useful in important events. Short open option strategies like short straddles or short strangles should be avoided.
What does the graph look like for the PSU index? Are you looking at high risk reward trades in PSU stocks ahead of election results?
The chart of the PSU index has formed a bearish pattern in the weekly time frame, indicating near-term weakness. However, the long-term chart remains favorable and offers good opportunities for buy-on-dips investors. Therefore, investors can remain vigilant in this space and add dips. Defense, infrastructure and housing PSUs continue to be good buying opportunities.
Give your best ideas for election week
Stock options:
1) Buy BHEL 300 TGT 320 SL 290
RATIONALE: The stock has experienced a consolidation breakout on the daily chart, indicating a potential change in momentum. Moreover, it is currently staying above the critical moving average, EMA 21, suggesting bullish sentiment. Additionally, the Relative Strength Index (RSI) is on the verge of entering a bullish crossover, further supporting the outlook for an upward movement. Based on the technical chart, the stock looks good to rally towards 320 in the short term, while support is placed at 290.
2) Buy IRCON 272 TGT 290 SL 262
RATIONALE: Stocks have seen consolidation after a rally on the daily chart, suggesting a period of price stabilization. It currently remains above the critical moving average, 21 EMA, indicating potential bullish sentiment. Additionally, on the hourly chart, the Relative Strength Index (RSI) has entered a bullish crossover, further supporting the possibility of an upward movement in the short term. Based on the technical chart, the stock looks good to rally towards 290 in the short term, while support is placed at 262.
3) Buy GESHIP 1082 TGT 1170 SL 1039
RATIONALE: The stock has experienced a two- to three-day consolidation period and is maintaining a position above its critical moving average, confirming a bullish trend. In addition, the Relative Strength Index (RSI) daily shows a bullish crossover, indicating increasing momentum and the potential for further upward movement. Based on the technical chart, the stock looks good to rally towards 1170 in the short term, while support is placed at 1039.
(Disclaimer: The recommendations, suggestions, opinions and views given by the experts are their own. They do not reflect the views of The Economic Times)
