The Nifty May futures closed in a Doji pattern after consolidating above 5,580 for most part of the trading session. A Doji forms when the opening price is the same or very close to the closing price. No buy or sell signal was seen from the day’s trading pattern as the participants booked profits amid speculation the government might raise fuel prices.
As expected, the May futures opened around 5,550 and moved to an intraday high of 5,604, thanks strong buying activity in the initial balance (IB) range. However, after consolidating around 5,580 during the afternoon trade, the higher price attracted sellers, taking the Nifty to the day’s low of 5,517. The May futures finally settled at 5,545 due to short covering at the lower level.
The IB range (5,542-5,580) saw poor volume (47 per cent), mostly through a buy-side trade. This implies price rejection from floor traders, in the price range established in the first two TPO time periods of 30 minutes each. The value area (5,542-5,592) saw 61 per cent volume through buy-side trade. The futures closed near the lower band of the value area, while its premium over spot Nifty declined from 11 points to 4 points.
The market picture chart hints at price-based resistance above 5,642. However, volume-based support is expected to come around 5,467. Spot Nifty may face resistance above 5,622-5,652 and is expected to get strong support below 5,482. Put writing was evident at the 5,400-strike put options and hence, the strong support level if the Nifty falls below 5,500. The May futures of Bank Nifty are expected to face resistance above 11,155 and volume-based support is in place at 10,935.
Options traders are expecting the Nifty to move below its support at 5,500, as the same strike put options saw unwinding of short positions. The 5,500-strike call options added 614,600 shares in open interest through sell-side trades as participants expect the Nifty to move below 5,500 in the near future. The open interest build-up at the 5,600 and 5,700-strike call options hints at strong resistance for the market. The 5,600-strike call options added 1.15 million shares in open interest through sell-side trades and the market is unlikely to move above this level.