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Divergences Continue

8 Jul 2020 ‚óŹ 07:08 AM

As nifty had higher divergences in sentiment indicators have continued to hold ground. Starting with the open interest put call ratio, it made a lower high than the previous 2 highs even as the nifty has made a higher high since June.

oipcr 080720

The raw advance decline ratio also shows lower peaks during each of the recent rallies as fewer stocks advance into the higher high made by the nifty.

adr 080720

The client options open interest as a percentage of total open interest is mildly overbought at a level where many short-term highs have occurred over the last 6-8 months

client 080720

The FII options positioning shows negative divergences over the 3 higher highs made by nifty, very similar to what you see in the put call ratio.

fiiops 080720

All put together these are only red flags and early warning signs of a possible trend reversal to watch out for if market price action confirms the same. At this moment I'm only looking at the possibility of the pullback or a retracement of the rally that started from 8800.

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