The smart pullback in the Nifty September futures from the day’s low of 4,957, which was also the support level, to 5,100, was on strong global cues. In this column yesterday, we had indicated the two-way movement in the Nifty futures. The market profile suggested initiative buying by other timeframe traders when the index crossed the most significant resistance at 4,980. The initial selling pressure above 5,050 did not impact the momentum, as top traders covered short positions above that level, suggested the trade summary matrix data.
The market saw strong buying range extension after opening in the middle of the previous value area, and rallied above the initial balance (IB). The range extension has given a strong buy signal, because the buying took place within and also above the previous day’s value area. With this, the market undercurrent has changed from sellers/bearish to buyers/bullish and that would take the Nifty above the 5,100 mark tomorrow. However, it would be very difficult to project the price level for tomorrow based on the market picture chart. The market is now so glued to global cues, that strong global markets may lead to fresh recovery tomorrow.
The volume-based pullback however, is expected to see a fresh rally around 5,150-5,190. Price-based support is expected to come around 5,000, suggested the market picture chart (MKTP). However, significant buying in the IB range (4,992-5,048) and value area (4,984-5,048) indicate that the September futures may get strong support around 5,050. The futures closed at a premium to the spot, and shed 3.67 million shares in the OI during the post-trading settlement period, indicating short-covering from the bears.
The pullback, as it was expected, was well supported by Infosys, Reliance Industries, HDFC Bank, ICICI Bank and State Bank of India. The top contributors to the index not only achieved projected price levels, but also closed around the day’s high on significant short covering in the IB range. The market picture chart (MKTP) hinted at fresh upside in Reliance Industries at 859 with strong support at 823. Infosys witnessed a fresh long build-up and is expected to go up around 2,471. State Bank may go up around 1,957, the MKTP chart suggested. The pullback led to a significant profit booking in 4,900-strike put options and fresh short build-up in the 5,000-5,100-strike put options. The participant build-up long positions in the 5,000-5,100-strike call options, as they expected the current rally to continue in the near future.