The Nifty is back in the trading range, albeit at the lower end, and hence all the good work that the bulls did on Tuesday got completely reversed on Wednesday. The Nifty is expected to remain subdued and likely to break below 5,500 if it surrender strong support zone at 5,550-5,530. The July futures closed below the lower band of value area (5,578-5,634) with 92 per cent volumes above the closing level. So, it will be interesting to watch how the developments unfold in in coming days.
There is a possibility of July futures testing the lower-end support at 5,484, and the resistance is likely to be above 5,590. The market is sandwiched between strong support at 5,560 and resistance at 5,650, with no momentum to set up break either-way.
The breakout above 5,650 failed to sustain for the third time in the last five days, as bears overcome strong opening by stepping up selling pressure in key index heavyweights.
The Nifty July futures finally settled at the lower end of the previous day’s initial balance (IB) range, as other time-frame traders stepped in and initiated responsive selling when the futures slipped below the day’s IB range (5,626-5,659).
It was typically responsive selling range extension, as it occurred above the previous day’s value area and extended to the previous IB range. It is a fairly strong breakout or breakdown type of signal and that goes with the type of trade. In other words, the market has turned weak and, hence, we may see some more correction. The trade summary matrix (TSM) data hints at a sell-side bias in the IB range and change of hands in the rest of the trading range. The market picture chart hints at a volume-based selling around 5,584 and price-based resistance around 5,667.
The July futures saw price-based selling below the point of control (PoC-5,630) and fairly poor volume in the IB range suggests higher level of resistance. Among key stock futures, State Bank of India, ICICI, HDFC Bank and Wipro closed on a weak note and, hence, we may see a fresh fall in these stocks on Thursday. ITC is expected to move up around 210 on Thursday.
The OI build-up in the Nifty 5,500-5,600-strike call options indicates build-up of short positions. So, the Nifty is poised to move below 5,500.