The Nifty on Thursday reacted sharply after hitting an intra-day high of 4,890 and closed in a Doji pattern, indicating uncertainty among participants. The index is now trading in the overbought zone and, hence, we may see some more correction in the near future. However, the Nifty has a strong support between 4,600 and 4,700.
Reliance Industries (RIL) on Thursday witnessed selling pressure at higher levels and closed at Rs 2,146 after hitting an intra-day high of Rs 2,240. The stock might undergo some more corrections as options traders were seen unwinding short positions at the 2,160 put and buying the 2,100 strike put.
As expected, the Nifty September futures hit an intra-day high of 4,890, but closed in a Doji pattern as traders started booking profit at higher levels. Intra-day, the September futures added 2.78 million shares in open interest (OI), mostly through sell-side trade, indicating profit-booking by bulls. It, however, added 1.35 million shares in OI at close and the Bloomberg data suggested that traders had created short positions when the index started trading above 4,865.
Options traders were seen unwinding their long positions at the 4,700 call as they expected the Nifty to correct sharply once it closed below 4,780. The 4,800 call witnessed change of hands as it added an OI of only 91,800 shares despite an intra-day trading volume of 6.41 million shares. Resistance is clearly seen above 4,900 as this strike call added 1.10 million shares in OI.
The traders were also seen writing the 4,500 and 4,600 strike puts, indicating support levels for the Nifty. The unwinding of long positions and the change of hands seen at the 4,800 and 4,900 calls suggested that the Nifty might face strong resistance between these levels. The 4,800-4,900 puts together added 1.15 million shares in OI, mostly through buy-side trades, indicating resistance levels for the index.
