As expected, the Nifty tested the 3,100 level and closed at 3,269 today – down by 73 points over the previous day’s close on short-covering in index heavyweights. According to a technical analyst at JM Financial, for any positive divergence, indices have to close below the last week’s low of 10,239/3,200 and go on to test the next big support levels of 9,900/3,000 to search for a trigger of bottoming out.
For tomorrow’s session, indices have strong support around 10,018/3,100 and strong resistance above 11,300/3,400 levels. This is indicated from a sharp increase in the open interest (OI) at the 3,100 strike put and profit-booking at 3,300 and 3,400 strikes puts. Traders added an OI of 1.10 million shares by selling 3,100 put options, indicating that they expect the index to get support at around this level.
The 3,300 and 3,400 strike puts and calls witnessed good volume, mostly in the form of short-covering and profit-booking.
The OI at the 3,400 strike call declined by over 10 per cent due to an unwinding of positions by call writers, while the OI at 3,300 and 3,400 strike puts declined by 0.84 million shares as put buyers covered their positions.
The Nifty October futures witnessed strong buying during early trade after a gap-down opening. Almost 10 per cent of the total volumes changed hands in the first half hour of trade at an average of 3,162. However, the major support for Nifty came at 3,100 and that took the index to the 3,333 level by afternoon on a strong opening for the Dow Jones futures.
Almost 50 per cent of the total volumes changed hands at an average of 3,220, indicating lower level of short-covering.
The October futures closed with a 20-point premium over the spot market at 3,290, while the OI declined by 422,400 shares, indicating unwinding of some short positions.