The upward momentum is facing good resistance above 5,666, but there is no sign of weakness yet. The lacklustre volume and the clueless trading sessions since Monday suggest there is not much difference in the perception of value between buyers and sellers. The last three trading sessions also suggest both buyers and sellers are active, by the range extensions on either side of the initial balance (IB). The close is in the middle of the range, indicating a balance between buyer and seller.
The trade summary matrix (TSM) or data on the indicative buy-sell bids by the traders, hints at buy-side trades suggesting some long build-up. This means bulls are building momentum for taking the index to 5,800.
However, the TSM data in the Nifty put and call options indicates strong sell-side volume in 5,500-5,700-strike call options and buy-side volume in the 5,500-5,600-strike put options. This clearly means the bears want a strong reversal into 5,560. So, the market may consolidate around 5,635-5,690, till the bulls and bears go for either side breakout.
The initial balance range (5,632-5,670) on Tuesday makes 98 per cent of the day’s trading volume and the time price opportunity counts, that indicates the presence of other time-frame traders. The buy-side trade in IB was seen in the range of 5,632-5,646, and the selling pressure above 5,650. The July futures settled above point of control (5,644) (PoC) and 37 per cent trade changed hands between the PoC and closing level. So, the market has maintained an upward bias, but is facing strong resistance above the 5,666 levels.
The July futures settled at 5,651, a 19-point premium to spot, and shed almost one million shares in the open interest (OI) over the intra-day positions.
The fall in the OI was mostly due to profit booking at the higher levels, the TSM data suggests. This intra-day sell-off can take the Nifty around 5,617, while recovery from the day’s low of 5,682 is expected to end around 5,673.
The options traders expect the Nifty to face a strong resistance above 5,700 and, hence, significantly increase the short-position in 5,700-strike call options. The sell-side OI build-up at 5,600-strike call options indicates weakness, and a possibility of the trade below 5,600 in the near future. While a strong support is at 5,500, the participants are hedging the long bet through buying of 5,600-strike put options.
