The S&P CNX Nifty closed below 6,100 on significant weakness in key index heavyweights and unwinding of long positions in index futures. The intraday trading data in Nifty October futures is hinting at volume-based resistance above 6,147 and price-wise correction around 6,062. The market is expected to open on a weak note tomorrow as the European markets and the Dow Jones were in the red.
The initial balance range (the first two time-price opportunity, or TPO, time periods of 30 minutes each) created by liquidity providers for day’s trading strategy showed strong selling pressure from long traders. The IB range has been moving below its previous value in the last couple of sessions, indicating rejection of the previous day’s price. The value area, where the participants spent most time trading, also saw selling pressure.
Nifty October futures continued to trade at a premium to the spot, which shows a fall in open interest, an indication of long unwinding. This means bears are waiting for the market to fall below 6,000 to cover their short positions. The unwinding in the 6,000-strike calls and fresh short build-up in the 6,100-strike calls suggest the market may see a fresh correction around 6,000.
The participants bought the 5,800-5,900-strike puts and added 10 lakh shares in open interest to protect the long positions in index futures. The 6,000-strike put added 7.80 lakh shares in open interest while there was unwinding of short positions in the 6,100-6,200-strike puts. This clearly indicates weakness in the market in the short term and also a fresh correction.
Among stock futures, Reliance Industries (RIL), Larsen & Toubro (L&T) and State Bank of India (SBI) closed on a weak note while Tata Motors and Reliance Communication witnessed strength. TPOs suggest a price level of Rs 1,042 for RIL, Rs 1,977 for L&T and Rs 3,185 for SBI. The TPO data indicate a price target of Rs 192 for Reliance Communication and 1,169 for Tata Motors.
