The Nifty May futures closed in a Doji pattern after facing strong resistance above 5,580 and getting support at 5,523. A Doji forms when the opening price is the same or very close to the closing price. This was the third consecutive day when the market closed in a Doji as nervous participants preferred to book profits ahead of poll results on Friday. The trading volume in the Nifty May futures was down 37 per cent to 11.89 million shares as traders were cautious in committing either side position before five states poll results.
The market is expected to remain range bound with lower-end support likely to come below 5,520 and an upside selling pressure seen at 5,580. The Nifty is struggling to go past 5,600 while the volume in the Nifty futures in the last couple of days has been on the decline. The options traders, too, were cautious in the last couple of days and expect a range bound trading on Thursday. They expect support at 5,500 as they are sellers in the 5,500-strike put options and indicate resistance above 5,600 as they build-up short positions at same strike call options.
The initial balance (IB) range (5,534-5,562), price movement in the first two time price opportunities (TPO), time periods established floor traders saw some short covering around 5,550. The value area (5,538-5,562) saw 65 per cent volume and short covering through buy-side trade.
However, the narrow band movement in the IB and value area hints at a strong consolidation at those levels. But the change of hands in call options above 5,600 and buy-side trades below 5,500 put options in the last couple of days indicate the participants are expecting a significant volatility on Friday if election results stun Congress.
Nevertheless, the market picture chart hints at a price-based resistance above 5,597. However, volume-based support is expected to come around 5,521. Spot Nifty may face resistance above 5,600 and is expected to get strong support below 5,519. And if the election results favour the ruling party, the Nifty May futures is expected to move past 5,642, the trading pattern in the last three days in the Nifty futures suggests. The May futures of Bank Nifty are expected to face resistance above 11,235 and volume-based support is in place at 10,925.