Bulls face a big test going ahead

F&O OUTLOOK

The Nifty faced resistance at 5,500 levels, as was expected. The markets reacted sharply, after the strength seen in the last two days, due to feeble follow-up support. The Nifty traded in a narrow band of 90 points, from an intra-day high of 5,500 and a low of 5,412, on weak volumes.

The derivatives volumes depleted to ten months low at Rs 31,121 crore due to the absence of retail investors. There is no substantial formation of long positions.

Technically, the hourly charts point to slower retracement of Monday's intra-day fall. Support remained at the 5,400 levels, indicated by the built-up in 5,400 Put options. 5,600 will act as a strong resistance.

With the Sensex having tested the all-important resistance of 18,900, based on pattern, average and retracement studies, the next couple of days would be a big test for the bulls. Analysts expect the index to consolidate in the 18500-18900 range.

Hectic activity was seen in the 5,500 and 5,600 Nifty Call options, with 24.5 per cent of the total Call options existing near these levels. This means that Call options writers expect resistance at these levels.

Over 28 per cent of the Put options OI was seen in the 5,000 (14.78 per cent of the total OI) and 5,100 (13.35 per cent) Put options, indicating support at these levels in case of a down turn. There was also a build-up in open interest in case of 5,500 Puts (12.4 per cent).

The Nifty PCR increased to 1.08 from 1.01 as Nifty Put options added OI of 8.79 lakh shares versus 2.69 lakh shares in Call options.