The Nifty opened on a positive note, but was unable to move above 5,440 on lack of volume-based support. It finally closed in a Doji pattern, indicating uncertainty at higher levels. The August futures moved in a narrow band of 30 points, with trading volume stuck between 5,440 and 5,420. The market is now in a bind and unable to find a direction for itself. The Nifty's trading range also moved down from 5,440-5,490 to 5,400-5,440.
When market internals are weakening and price is holding up, a break-out is imminent and, hence, it is advisable to be adequately protected, according to an Edelweiss analyst. Only positive thing has been the strong support for the 50-share index below 5,420.
The August futures closed at a 14-point premium to spot on Tuesday and shed an open interest (OI) of over two million shares intraday through buy-side trades. Tuesday's trading volume in the derivative segment hints at a narrow band movement for the the Nifty August futures.
The point of control, the area where the market spends most time trading, saw 35 per cent of volume distributed around 5,428-5,434 levels. This means participants are facing difficulty in tracking trading opportunities.
The time-price opportunity projection indicates strong resistance for the August futures above 5,448. The trading pattern in call and put options of the Nifty August delivery indicate strong support around 5,400 and continued resistance above 5,500. The 5,400 and 5,500-strike call options together added 753,700 shares in OI, mostly through sell-side trades, showing the resistance levels for the Nifty. The 5,400-strike put witnessed more sell-side trading during the morning session, and short-covering in the afternoon session when the Nifty drifted below 5,430.
