The Nifty on Tuesday closed in a Doji pattern — third time in succession, indicating indecisiveness or same state of the market. A Doji pattern is formed when the opening price is same or close to the closing price. Tuesday’s formation was of a lower shadow, suggesting there were active sellers at the initial stage that dried later.
Clearly, the market is in no mood to move down substantially from the current level, with the continued higher-level selling pressure from the other time-frame traders.
The market profile indicates selling range extension in the morning session, as the Nifty breaks down below the initial balance range (5,827-5,878) on account of selling from the other time-frame traders.
The selling range extension occurred below the previous value area (5,890-5,912) and, therefore, it was initiating activity. The range extension normally gives a strong breakout or breakdown signal. However, participants are waiting for the expiry of the April series on Thursday, after which the Nifty may witness range-bound movement.
The open interest in the Nifty call and put options hints at resistance above 5,900 and strong support below 5,800. The traders covered short positions in the 5,800-strike call options during the intraday trade and build-up fresh short positions in 5,900-strike call options at the higher premium. The Nifty April futures closed above the value area (5,812-5,874) with 20 per cent volume and 21 per cent TPO, indicating price-based short covering from derivative participants.
The trading volume in the Nifty futures and options rose sharply on Tuesday on account of significant short covering at the lower level. The Nifty April futures closed at a 13-point premium to spot and saw unwind of 6.93 million shares in the open interest through buy-side trade during the intraday recovery, indicating short covering from bears. The May futures added 8.93 million shares in OI and closed strongly at 5,911, a 30-point premium to April futures.
This trend indicates strong undercurrent. The lower level support is expected to take the Nifty around 5,962, suggests the market picture chart sourced from Bloomberg. The support for the April futures is seen at 5,842. The spot Nifty is expected to see strong resistance above 5,950 and support around 5,847. The April futures of the State Bank of India expected to get support at around Rs 2,900, with a price-based upside is seen near Rs 3,017.
