The Nifty futures consolidated at 5,420-5,440 during the morning session and moved out of a narrow range to close at 5,492, due to compelled short-covering on the back of a strong opening of European markets. The build-up of short-covering was significant with more than a third of the day’s trading volume changing hands after the Nifty moved above 5,460. The market picture data indicates a long tail in the last 45 minutes after bulk buyers generated strong volumes, mostly through buy-side trades.
The strong volume above 5,460 is likely to take the Nifty above 5,500 with an upside target of 5,562.50. The time-price opportunity (TPO) data for the last 45 minutes also indicates a possible breakout above 5,500. If one splits the day’s trading session into separate periods of 30 minutes each, the TPO support remains at around 5,435. However, the market picture chart shows that participants spent most time trading below the midpoint (5,456), thus rejecting a surge above 5,460.
The midpoint is simply the half way between the high and low of a given picture. The midpoint should match the point of control (PoC), or the maximum TPO sessions of 30 minutes each for an evenly distributed market. If the midpoint is below the PoC, it is seen as a bullish indication, particularly if the market goes on to trade above the PoC. If the midpoint is above the PoC, then new lows are required to move the midpoint lower. In this case, the TPO target moves down to 5,367.
However, the surge in volume and significant price action above the PoC – and also over the midpoint – suggest a possible breakout above 5,500. The participants covered an open interest (OI) of over two million shares in the Nifty August futures and a build-up OI of over two million shares in the 5,400-5,500-strike put options signals strong upside in coming sessions.
More important, participants covered short positions worth 1.73 million shares in the 5,400-strike call and 1.88 million shares in 5,500-strike call options, signaling an upside breakout above 5,500 in the near future.