Exchange of artillery fire between North and South Korea prompted a three per cent fall in the benchmark indices as investors chose to unwind long positions amid concerns over global economic growth.
The market picture chart (MKTP- source from Bloomberg) that displays time and volume at price in the form of distribution had clearly indicated a fall based on Monday’s intraday trade in the Nifty November futures.
The pattern that appeared on MKTP had indicated that the time-price opportunities (TPOs) based decline will be around 5,857 with volume-based support at 5,847. The November futures touched an intra-day low of 5,822 and recovered to close at 5,940.
Going ahead, the MKTP chart for the Nifty futures is hinting at fresh recovery with TPOs based upside at 6,067. The volume based surge may take the Nifty to around 6,080.
However, based on the price and volume action after 12.30 pm, the Nifty could move back to around 5,820 due to intra-day selling pressure and if global cues remained subdued. The trading pattern in the Nifty November futures and December futures also indicated fresh recovery on account of short covering and fresh long build-up at the lower level.
The November futures shed 4.99 million shares in open interest (OI), while December futures added 6.20 million shares in OI mostly through buy-side trades.
A significant addition of OI was seen in 5,900 and 6,000 strike call options of the November series, despite a two-day deadline for expiry. The OI build-up at these calls may be to hedge short positions. The resistance based on OI positions in call options continued to be above 6,000.
The participants seemed to have covered short positions in 5,800-5,900-strike puts during the intra-day fall in the Nifty to protect fresh erosion. However, fresh put writing was seen in 5,900 strike put options on the expectation of strong support for the Nifty at that level. The change of hands and short covering was seen in 6,000 and 6,100 strike puts on expected resistance for the Nifty above 6,000.