Momentum is back

F&O OUTLOOK

The Nifty surpassed its resistance level of 4,900 on the very first day of the new derivatives series, despite the net selling by the FIIs, following by the strong buying by domestic institutional investors.

The Nifty April futures settled at a premium of 29 points and the open interest rose by 12 per cent, indicating the creation of fresh long positions.

The high Nifty premium is, however, a matter of concern as it suggests that long positions are not adequately hedged. Therefore, any downturn or selling pressure will weaken the current rally, according to technical analyst Kamalesh Langote of vfmdirect.com.

The futures were trading at a premium of 10-15 points during most of the Friday's trading. The premium widened to 29 points as the FIIs covered their short positions and the Nifty made a sharp recovery from the day's low of 4,796.

The Nifty should now test its 200-day simple moving average of 5,100, thanks to Friday's close above 4,900. Moreover, the daily relative strength index (RSI) surged above the mean level of 50 after a long time, supporting the positive momentum.

The markets have given a trend-line breakout. The Nifty has pulled back smartly from the 4,800 levels to close at 4,942. It is now heading towards the 5,300-5,400 mark. The Nifty will face its first resistance at 5,009 and 5,099 thereafter, whereas it has support at 4,835.

The Nifty 5000 calls options witnessed a strong build-up in open interest, with the positions totalling around 1.7 million shares. A strong built-up in put options open interest took place at the 4,800 and 4,900 strike prices.

This shows that the Nifty has a strong support at 4,900 and resistance around 5,000 levels.