The Nifty witnessed profit-booking above the 61.8 per cent retracement level of 4,940 and closed marginally above the trendline reversal level of 4,880. Technically, a confident crossover of 4,940 was crucial for the recovery to continue. Nifty futures and options data suggest we may see fresh correction if the Nifty slips below 4,860.
The Nifty November futures closed at a discount to the spot and shed 1.48 million shares in open interest, which suggests profit-booking at higher levels. Bloomberg data suggested that traders booked profit and created fresh short positions in Nifty futures above 4,940 levels.
Intra-day traders, however, covered short positions below 4,900.
The trading pattern in Nifty call options suggests the index may not hold 4,900 levels in the coming days and may slip below 4,800.
Traders seemed to have booked profit in 4,500-4,700 strike calls as these together shed 0.4 million share in open interest, mostly through sell-side trades. The 4,800 call added 159,600 shares in open interest, mostly through sell-side trades, indicating a short build-up.
Traders expect 4,900-4,940 to be the supply zone say it will be safe to go short at this level. The 4,900 call added 1.21 million shares in open interest, mostly through sell-side trades.
The 5,000 call also added fresh open interest through sell-side trades, indicating that 4,900-5,000 are likely to be strong resistance levels.
Interestingly, the 4500-4,800 strikes put saw unwinding of short positions as these shed over one million shares in open interest, mostly through sell-side trades.
The 4,900 put added 71,400 shares in open interest despite a trading volume of 9.41 million shares. The 5,000 put witnessed profit-booking as it added 133,300 shares in open interest out of total trading volume of 1.24 million shares.
