The Nifty opened on a positive note to move between resistance (5,425) and support (5,355), but closed in a Doji pattern as wary participants preferred to be neutral on Monday. A Doji pattern indicates an uncertainty among market participants and in the current scenario it is signaling weakness in the short-term trend. Technically, a break below 5,300 will confirm the weakness and that will take Nifty down to 5,000. The bulls will get an upper hand only if the index closes above 5,500.
The derivative participants sold shares in the initial balance (IB) range (5,385-5,425) and did some value buying below 5,385. The trade summary matrix (TSM) data indicate selling pressure above 5,400. The futures saw some responsive selling and closed below the previous day’s value area (5,385) after opening on a strong note. The sentiment appears to be weakening further as the market opens above the value area, but began to trade for two consecutive time-price opportunities (TPOs) period inside the value area, and subsequently closed below the value area.
The IB range, the first two TPO time periods, saw 99.8 per cent volume and 98 per cent TPO counts, indicating lack of support at those levels. The TPO counts below the Point-of-Control (PoC=5,385) remains above 50 per cent, suggesting strong selling activity and a net selling day. The Nifty March futures closed at a premium to spot and shed 1.20 million shares in open interest (OI) through buy-side trades below 5,385, the TSM data suggest. The selling pressure was seen above 5,385 and hence the decline in OI was largely due to unwinding of long and short positions.
The price projection using TPOs and volume picture chart suggest higher resistance (above 5,449-5,461) and support at 5,347. The spot Nifty is likely to see a volume-based sell-off around 5,330 and strong resistance above 5,420. The Bank Nifty is expected to face strong resistance around 10,900 and is likely to get support around 10,700. State Bank of India is expected to move up around 2,637 and get support at 2,557. ICICI Bank is likely to move up around 1,023 and get strong support at 997.
Options traders built up short positions in the 5,400-strike call options on expectation that the current weakness is likely to continue for some more days. Short-covering was seen in the 5,400-5,500-strike put options as the participants expect the Nifty to face strong resistance above 5,400.
