Coming to the buildup of fresh short positions, when the stock prices move downward and open interest on the counter increases, it is taken as a sign of a short build-up. The signal is considered more reliable if the volume on the counter has also seen an increase as the stock price was declining.
Coforge dropped by 3.81%, and the open interest saw an increase of 18.39%.
Persistent Systems fell 3.46%, and open interest saw an increase of 5.03%.
Tech Mahindra declined by 2.8%, and open interest saw a rise of 3.48%.Vedanta price fell by 2.66%, and open interest saw a rise of 4.58%.Wipro dropped by 1.97%, and the open interest saw an increase of 5.42%.Also Read: LIC, YES Bank among 78 stocks that can enter F&O list if Sebi changes rules
Some additional checks would help traders in taking better trading decisions as they increase the probability of a follow-up of the upward movement in the stock price.
First, if this long build-up is accompanied by any bearish crossover, which means that whether in the current down-move when the open interest has moved up the stock price has moved below its 20, 50 or 100-day moving average. Another couple of points which traders should keep in mind when taking a trade by looking at the matrix of build-up of short positions on the basis of open interest. Also check whether there is any extraordinary build-up of long positions in any out-of-money put option, especially any far-of-the-money out option. That indicates the probability of any informed person taking exposure through options for any possible downside.
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