The Nifty October futures settled around the day’s low after facing resistance at 5,055. The floor traders covered their short positions in the first hour of trade, as the October futures opened on a strong note, as anticipated, and moved up to the day’s high. However, on account of a big, fast move from Wednesday’s low of 4,747 to today’s high of 5,055, the market advertised for opposite activity, responsive activity. So, responsive selling by other timeframe traders halted the trend and took the index to the day’s low of 4,970.
Nevertheless, the responsive selling range extension resulted in a move which was equal to the lower range of the previous initial balance (4,980), which is a fairly strong breakdown signal. Also, the 300-point rally in three trading sessions was accompanied by thin volume and unchanged open interest, so there was no major bull force to pull the index above 5,100. Selling above the upper band of the value area (4,990-5,038) with 20 per cent volume mostly through change of hands, indicated entry of a new set of players, mostly bears.
The market undercurrent has changed after today’s responsive selling, and hence, we may see additional selling pressure in the market tomorrow if the global market remained weak. Volume-based selling in the Nifty October futures would lead to a fresh down side around 4,922, the market picture chart sourced from Bloomberg suggested. The upside resistance was seen at 5,026-5,055-5,087. The trade summary matrix showed buyers’ dominance below 4,980, but volume was extremely thin at around seven per cent.
The Nifty’s move for the last three days suggested that the bulls were trying to undermine the grip of the bears that has been present for a while. The medium-term technical outlook continue to favour the bears, and the bulls need to push the Nifty beyond certain key levels before a trend change could come about, says Sadanand Raje, head institutional sales and technical analyst, Pinc Research. Important support was seen at 4,750 and resistance levels are 5,050 followed by 5,250. There was no escape from uncertainty unless these key levels are broken.
The open interest build-up at 4,900-strike call and same strike put indicate that the Nifty may get strong support at 4,900. The put call ratio of 1.26 times in 5,000-strike and four times in 5,100-strike suggested strong selling pressure for the Nifty between 5,000 and 5,100 levels.
