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Bank Nifty – ΔOI analysis

After a long time, we are back with a post analyzing the bank nifty’s movement and the way Δ OI could help you trade the big moves.

See below the Δ OI data for 28th April 2020 with key quantities and prices marked divided into time-slots.

Here’s the activity of first 1.5 hours

Δ OI data

If you observe the price action,

  • We opened higher than the previous day’s close and saw some heavy buying (77k at 20448) right at the open but failed to stay there and stabilize and started moving down towards the previous day’s highs.
  • Once we moved there by 10:10 AM, prices started stabilizing in the range of 20280-20340 from 10:10 AM until 10:50 AM.
  • Note that after morning longs of 77k there were no significant longs until 10:10 AM, there were no significant shorts either.
  • In the next 40 minutes i.e 10:10-10:50 you can see price stabilizing in the range of 20280-20340 fut and at the same time good amount of longs getting added in this range suggests dip buying so taking short betting on further fall is not a high probable setup. As this 40 minutes of activity is a clear accumulation as can be seen from the data.

Let’s also look at the options data during same time in the important strikes 20500,20300,20400 in the form of crossover and also 20200 CE and 20400 PE which are immediate ITM strikes for either side movement.

By looking at the data from nearby option strikes it’s clear that there’s some resistance but there wasn’t a clue of further downside.

So combining both the options and futures data one can take a view that 20300 is proving to be a good support + ITM PE writing is more active than CE writing and can take a trade playing for a bullish move on bank nifty whenever the price is trying to take support at those levels.

One more point worth noting is that there are no shorts in futures that came in on rises towards 20440, this essentially means the big money is not interested in shorting higher levels but it’s interested in buying the dips.

What was the best time for entry into longs? Often big moves come after the weak hands are out especially in bank nifty. So try to take an entry after a move happens which is tempting the other side to take position. In this case the move towards the accumulation zone of 20280-340 by 12:25 PM is one such move. These moves happen almost every day and that’s where your best entry lies and there’s no harm in waiting for the right opportunity.

Now comes the question of stoploss, you may ask if i buy at 20280-340 what should be my SL? The stoploss will be a move below this accumulation zone of 20280-340. A word of caution here when prices retest be sure not to preempt what the market can do but rather wait for market to settle at these important zones especially if you’re a beginner.

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