Avoid Long Positions On F&O Expiry Day

As the tariff war turns into new twist after the Trump comment, the global markets rallied over 2.5 per cent. The domestic equity benchmark index Nifty gained by 161.70 points or 0.67 per cent and closed at 24328.95. The BFSI sectors were negative. The Consumer Durables, Private Bank, FinNifty, PSU Bank, and Banknifty declined by 050 per cent to 0.96 per cent. The IT index is the top gainer with 4.34 per cent. The Auto, Pharma, Healthcare, Realty, Midcap, And Consumption indices gained by 1 - 1.40 per cent. The India VIX is up by l4.79 per cent to 15.96. The Market breadth was positive as 1516 advances, and 1340 declines. About 50 stocks hit a new 52-week high and 124 stocks traded in the upper circuit. Warre Energy, HDFC Bank, BSE, HCL Tech, and ICICI Bank were the top trading counters in terms of value.

The Nifty closed above the prior day’s high and erased the doji candle’s implications. It formed an open high candle. But the index has formed another doji candle. The volumes were lower than the previous day. The IT sector’s stocks added strength and led the market. Infosys, HCL Tech, and TCS added 110 points to the Nifty. The BFSI sector stocks were weak. Though the index is making higher high candles, the price action is not convincing to take long positions. The short-squeeze has led this rally. As expiry is just one day away, expect some cooling off in the bulls. The rollovers were at 43 per cent. The Nifty retraced more than 50 per cent of the last eight-month fall in a faster manner. Now, the time correction takes place once the expiry trades are over. After the opening, the index failed to move higher and traded mostly in the range. The Banknifty and FinNifty led the market formed a bearish engulfing candle, which is negative for the broader market.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)