Deploy Butterfly Call Spread to take advantage of pullback in Nifty next week: Kunal Shah

The first week of January started off on a negative note. What led to the price action?
Benchmark indices witnessed strong selling pressure at a higher level throughout the week backed by global slow down news and the new coronavirus variant.

The index witnessed selling pressure on both the cash and the future segment by the FIIs.

Do you see the weakness continuing in the second week as well. What are the important levels that one should track for Nifty and Nifty Bank?
The index is already trading in oversold territory so a pullback cannot be ruled out from the current level. The undertone remains bearish as long as the Nifty stays below 18,200 and BankNifty below the 43,000 mark.

Any particular strategy that traders can deploy on Nifty ahead of Budget?
Since the markets have already witnessed a sharp correction a pullback rally can be deployed from the current levels. One can deploy Butterfly Call Spread on the Nifty index.

BUY 1 lot of 17900ce

Sell 2 lot of 18100ce
Buy 1 lot of 18200ce

Debit spread: 50

Stop loss: 10

Target- 120/150

Infra, as well as the industrials Index, rose more than a percent – are we seeing a pre-Budget rally?
Infra and industrial index traditionally have also witnessed rallies before the Budget session. The chart this time however does not indicate a strong uptrend but has been consolidating in a broad range. The infra index has to break above 5300 to witness some buying momentum.

Utilities and IT fell more than 1% — what led to the price action?
IT has been under pressure of the concerns of the US recession which led to selling pressure. The IT companies will start posting their quarterly results next week and that is what the market will be looking out for.

IT stocks may be volatile in the near term and there will be result-specific movement.

IT companies will be declaring results in the coming week. How should one play ahead of results on Monday, , and on Thursday?
The chart does not indicate any trending move in the IT pack and one should play the sector with a very cautious view. Since the sector has corrected a lot one can play on the long side to manage the risk-to-reward ratio.

Any 2-3 trading ideas for the next 3-4 weeks?
Here are top trading ideas –

Life: Buy| LTP Rs 472| Buy at 470| Stop Loss Rs 440| Target Rs 510-530| Upside 12%


ICICI Prudential Life has formed a double bottom formation on the weekly chart with a sharp surge in volumes. The momentum oscillator RSI has also reversed from the oversold territory indicating a reversal in the near term.

The lower-end support is visible at the 450-430 zone which will act as a cushion for the bulls and the upside targets are 510-530.

: Buy at Rs 585| LTP Rs 587| Stop Loss Rs 560| Target Rs 620-640| Upside 9%

On the daily chart, the stock has broken out of a falling channel. The RSI is in positive crossover; a positive divergence is visible on the daily RSI.

The trend looks positive for the medium term. On the lower end, support is visible at 564. On the higher end, the stock may move towards 630.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)