The Nifty is holding its crucial support level of 3,500, though it has breached the 3,600 level and closed at 3,593 today. The 14-day Relative Strength Index (RSI) at end of the day chart is above 50 indicating that the market has strong support at the current level. As indicated earlier, we may see the trend reversal only if the Nifty closes below 3,500 and RSI fell below the trend ling support, which is at 50. As written earlier, the trend will reverse, if the Nifty fell below 3,500 level.
The key benchmark indices fell for the second straight day after the exit polls indicated a fractured mandate for the just-concluded parliamentary election. This two day reversal technique means the market has given an exit to long traders. However, the trading pattern in Nifty options indicate that the index will move between 3,500 and 3,630 levels till the poll results. The traders were seen writing the 3,500-3,600 strikes put on expectation that the Index may not fell below these levels.
The Nifty May futures closed at 3,603, 10 points premium to spot and added open interest (OI) of 385,500 shares. The Bloomberg data of intraday trade in Nifty futures suggest that the traders booked profit when the index was trading above 3,600, while they build up long positions at index level of 3,600. This means the F&O traders expect the index has strong support at around 3,550-3,600 level.
The 3,600 and 3,700 puts witnessed change of hands and some unwinding of short positions as the Bloomberg data suggests that over 60 per cent of trading volume (5.8 million shares) were from buy side, while OI at the end of the day fell by 228,650 shares.