Nifty started the week on a negative note and traded with extreme volatility on either side throughout the week. Nifty closed at 17186 with a loss of 129 points on a weekly basis. On the weekly chart, the index has formed a small bullish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction. The chart pattern suggests that if Nifty crosses and sustains above the 17400 level it would witness buying which would lead the index towards 17600-17800 levels.

However, if the index breaks below 17000 level it would witness selling which would take the index towards 16800-16500. For the week, we expect Nifty to trade in the range of 17800-16500 with mixed bias. The weekly strength indicator RSI continues to remain flat indicating the absence of strength. However momentum oscillator Stochastic has turned positive from the oversold zone indicating a possible up move in the near term.

Bank Nifty started the week with a downward gap and buying momentum led it to close on a positive note. Bank Nifty closed at 39306 with a gain of 128 points on a weekly basis. On the weekly chart, the index has formed a small Bullish candle forming a higher High-low compared to the previous week, and has closed above the previous week’s high indicating positive bias. The chart pattern suggests that if Bank Nifty crosses and sustains above 39500 levels it would witness buying which would lead the index towards 39800-40100 levels. However, if the index breaks below 39000 level, it would witness selling which would take the index towards 38800-38500.

For the week, we expect Bank Nifty to trade in the range of 40100-38500 with mixed bias. The weekly strength indicator RSI and momentum oscillator Stochastic have both turned flat indicating the absence of strength on either side.

Sectors and stocks to watch this week

We expect sectors like Banknifty, NBFC, IT and Chemical may show good strength this week. One can focus on Kotak Bank, Fedral Bank, HDFC Bank, LTTS, Deepak Nitrite, UPL.

NSE Nifty 50 trading strategy for this week

The strategy which we are suggesting for the week with expiry schedule on 20th October 2022 is Iron Butterfly, which involves selling of one lot of Nifty 17,200 CALL & PUT one lot each having premium of 137 and 147 respectively and simultaneously buying one lot of 17,550 CALL at 23 and; buying one lot of 16,850 PUT at 39. Both risk and reward in this strategy are limited and the gains in the strategy will be accrued between two levels i.e 17,450 on upside, and 16,950 on downside. Maximum profit of Rs 11,100 will happen if Nifty closes/expires at 17,200. On the other hand, if Nifty on expiry closes above 17,422 (upper bep) or below 16,978 (lower bep), then strategy will start making loss; while for any close above 17,550 or below 16,850, the max loss will be restricted to Rs 6,400.