Index poised to move up significantly

On a weekly basis, the Nifty closed above the value area (5,825-6,000), with only 50 per cent volume changing hands in this area. The initial balance range (5,700-5,835) saw only 18 per cent weekly volume, which indicates lack of selling pressure from liquidity providers. So, on the weekly market picture chart, the Nifty is poised to move up significantly after consolidating around 6,050. The time-price opportunities (TPOs), the value area that makes up 70 per cent price points, is hinting at an index level of 6,247 (spot) and 6,257 (futures). The support is expected to be around 5,960 and 5,980 for Nifty spot and Nifty futures, respectively.

The trading in call and put options suggests that support for the Nifty is expected to move up from around 5,900 to 5,970. The participants started unwinding short positions in the 6,000-strike calls and added long positions in the 6,100-6,200 strike calls. This hints that the resistance level for the Nifty is likely to move up from 6,050 to above 6,100 in the near future.

There was short-covering in the 5,900-6,000-strike call options and significant build-up of long positions in the 6,100-6,200-strike call options. The 5,800-5,900-strike puts saw a significant addition in open interest through sell-side trades, which indicates that traders are comfortable shorting the Nifty puts. The 6,000-strike put options added 2.23 million shares in open interest over the week, which indicates a new support level for the Nifty.

As expected, the Nifty consolidated above 6,000 on Friday and ended in a Doji pattern after testing the lower-end support of 5,970 on short-covering by bears. A Doji pattern indicates indecisiveness among participants while the intra-day trading pattern shows that bears are not interested in building fresh short positions. The trading data in Nifty futures show short-covering of around two million shares, mostly around value areas, from mid-size traders. The top traders were net sellers while retailers changed hands.

Technically, a Doji pattern also means a sharp either-side swing in the near future. For the bulls, the global markets are looking good with euro zone fears slowly fading away after the US extended support to prevent any sovereign default. Nifty December futures is expected to consolidate on Monday with the upside target of 6,062 likely to meet with selling pressure. Volume-based support is seen around 5,952.50. The spot Nifty is poised to move up around 6,047-6,057, the market picture chart sourced from Bloomberg suggests.