The market is likely to remain strong in the coming week with the Nifty expected to hold the 2,800 level and move to 2,900, then up to 2,950. Any dip from the current levels is a buying opportunity with stop-loss at 2,700. FIIs seem to have covered some shorts and build up fresh long positions on Friday. This augurs well for the market which expects a technical bounce up to 2,950.
Kamalesh Langote, technical analyst of vfmdirect.com, expects the markets to be rangebound and sees a bullish breakout above the 2,850 level. However, the bullish breakout is likely to be for a few days only and the market is likely to form a lower top. This means that the rally may not sustain above 2,950 and weakness may set in if the 2,760 level is not sustained.
According to Niitn Murarka, head (derivatives) at SMC Global, intra-day volatility remained high after a fall earlier this week and that will cause more trouble for the traders in the coming week. The Nifty January futures discount of 25 points converted into a discount of 10 points on Friday, indicating short covering in the Nifty futures. The Nifty February futures closed at a premium of 3 points and added open interest of 1.37 million shares last week indicating a long build up.
The weekend session saw open interest addition in the 2,800 and 2,900 call options on the long side after the Nifty found support around the 2,700 mark. Short addition in higher strikes of call options was observed at higher levels. Hence, the call and put option data does not support drastic downsides from the current levels. However, a lot depends on the third-quarter results.
On the lower side, the 2,700 level is still acting as a crucial support for the index. On breaching this level, the index might move to the 2,500 level.
On the higher side, 2,950 is supposed to act as a strong resistance. Fresh long positions can be assumed in the Nifty if it is able to sustain above the 2,800 level, with a strict stop-loss placed around the 2,780 level.