The market took a break on Friday after two days of swift movement on account of weak global cues.
The Nifty consolided with over 90 per cent volume changing hands around 5,510-5,530, Bloomberg data suggested.
The momentum has come into the buy mode after being sideways for a couple of weeks, which is a positive sign for the bulls. The only concern is that after breaking out from the 5,500 resistance, it is likely to struggle to get past the 5,550 level.
The Nifty ended Friday at 5,531, down 10 points. Volumes in Nifty futures were marginally higher compared with the previous volumes. On the option fronts, implied volatility has remained on the lower side of the band, indicating limited upside. Foreign institutional investors (FIIs), after covering short positions in the first three day, were net sellers in index futures on Friday. They covered short positions in the Nifty by buying call options.
The volume at price data suggest buy trades throughout the day, indicating short-covering by bear operators. The Nifty August futures, despite a trading volume of 13.35 million shares, shed 319,450 shares in open interest, indicating unwinding of short positions and profit-booking at higher levels. The September futures saw unwinding of short positions as they added 612,050 shares in open interest despite a trading volume of 2.15 million shares.
Market picture charts show participants spent the most time trading at 5,515-5,520 and 5,520-5,525, crating almost 66 per cent volume around those levels. The area where the market spends the most time trading is called point-of-control (PoC), that is, more time-price opportunities (TPO) period of 30 minute each. TPO charts and volume counts indicate if the market is balance or unbalanced. Higher TPOs and volume between 5,515 and 5,525 suggested that participants were comfortable trading these levels.
Since the Nifty remains range-bound and created 90 per cent volume in 20 points difference, the price projection using TPO and volume charts was around the day’s closing level. TPO data indicate the Nifty level of 5,497 while volume-based upside is at 5,537. The continued unwinding of the 5,500-strike call options and fresh additions of open interest at the same strike put options suggest the Nifty may not slip below 5,500 in the near future.