Week long pullback halted on Friday. We had indicated the same in our column on Thursday based on the trading pattern in the Nifty. The market closed in a Doji pattern as the wary participants booked profit at the higher levels and covered short positions at lower levels. A Doji forms when the opening price is the same or very close to the closing price. There is no definitive or suggestive buy or sell signal from this formation. However, a Doji occurs at the end of a trend and hence we could say it is a sign of weakness for that trend.
The market on Friday showed some sign of definitive trend as the time price opportunities (TPO) counts above and below the point of control (PoC) were same, indicating active buyers and sellers. However, SGX Nifty closed on a strong note on OTC counter of the Singapore Exchange and hence we may see a positive opening on Monday.
The trade summary matrix (TSM) data suggest buy-side bias from floor traders in the first two TPO time period of 30 minutes each. In the remaining sessions the trading activity was more of change of hands and initiative selling at the higher level. The volume picture chart suggest the Nifty level of 5,827 if the selling pressure continues. The upside may be terminated around 5,880. The spot Nifty could see a trade below 5,800 and an upside resistance is seen at 5,842.
The initial balance range (5,845-5885), the first two trading periods of 30 minutes each saw 90 per cent volume and TPOs, significantly up from 45 per cent volume and TPO counts on Thursday. The rise in volume in the IB range and the close of the Nifty below the IB range suggests price rejection by floor traders and hence some correction is inevitable. The Nifty April futures closed at a 25-point premium to spot and saw unwind of 233,550 shares in open interest indicating profit booking at higher level.
The open interest build-up in the call and put options in the new April series hints at support at 5,700-5,800 and resistance above 5,900-6,000. However, the TSM data show buy-side bias in the 5,700-5,800-strike put options and hence participants seem to have hedge long positions in the Nifty futures.