After testing the lower end of the support level, the Nifty recovered marginally to close at 6,050 on account of buying at lower levels.
As expected, Nifty January futures found strong support at 6,050. It settled at 6,072 as bears covered short positions at lower levels. The value area witnessed change of hands, while traders booked profits in the initial balance (IB) range. The Nifty may see a fresh correction around 5,990-6,010, followed by a significant recovery.
The January futures closed around the upper band of the value area (6,060-6,098), with 11 per cent volume below the lower band. The IB range was above the time price opportunities (TPO)-based support of 6,050, with considerably low volume of 25 per cent. Traders preferred to book profits at those levels, with the trade matrix showing sell-side trades. The selling pressure in the IB range may make it a strong resistance point for recovery.
The Nifty will find it difficult to move above 6,090 initially and above 6,130 thereafter. The trading pattern suggests bulls will get an upper hand only if the index closes above this level. However, the healthy premium commanded by the Nifty futures in the last five trading sessions indicates that bull operators are operating in a comfort zone. The open interest remained unchanged around 20 million shares, indicating short-covering by bears.
Nevertheless, the market picture chart for the day hints at a level of 6,100, with strong resistance likely around 6,130, based on TPO projections. The volume picture chart suggests support around 6,017. The TPO data suggest strong support for the spot Nifty at 5,980. However, the volume-based correction can take the index to 5,947, the volume picture chart indicates. The trading pattern in Nifty call and put options suggests the index may find it difficult to trade above 6,100. However, high volumes in the 6,100-6,200-strike put options, hint at a significant recovery.