BANKNIFTY Example – Crossover

Today we are writing our first example for the crossovers feature and this example is from Bank Nifty.

As mentioned in the initial post, Crossovers help you assess if a support is going to hold or it’s going to be broken and we detail today’s case here.

Bank nifty had a support around 30730-830 zone after its opening at higher levels and the significance of this level in the recent few weeks, we can’t pinpoint this zone in the candle chart as support but these levels are derived from market-profile analysis if you’re just curious.

Now after opening the bank nifty has fallen to these levels and has spent some time at these levels, but what happened when it was spending at these levels we see that through the crossover charts below

We present below the charts of 30600 PE and 30700 CE (lower end), 30700 PE/CE (Centre) and 30800 PE and 30700 CE (upper end)

Firstly for a support to hold we should see put writers dominating along with call writers covering at the same time.

Let’s review each of the scenarios below.

An ATM CE shouldn’t see much writing and OTM PE should see writing for a support to hold. That’s the reason to check for 30700 CE and 30600 PE, you can observe that both started moving away from each other post 12:40 PM i.e after the fall. In this case PE OI was increasing and at the same time CE OI was decreasing which is a bullish indication.

See 30700 CE and PE, where CE OI didn’t cross PE OI here which is also a bullish indication.

ITM PE writing and ATM CE OI unwinding is a bullish indication which you can see here in 30800 PE and 30700 CE.

As all these were in same direction the market took a support at these levels and reversed to the upside. Futures also supporting these OI changes in options will be a high probability trade setup. Today we didn’t see a conclusive trigger from futures but it wasn’t suggesting any short buildups at these time and price levels.