After gap-down opening at 4,870 and moving down to the day’s low 4,813, the Nifty October futures closed in a Doji pattern, as the day timeframe traders, mostly institutions, turned buyers at the lower level.
A Doji pattern is formed when the opening price is the same or very close to the closing price. The Doji on Monday had a long lower shadow, which suggests active sellers at the initial stage, but once the selling dried up, buyers took the charge to regain losses on the day.
The market profile suggested a normal day, as it had wide initial balance (IB) and occupied 80 per cent of the day’s trading range. It is difficult to establish any trend out of such a profile, as the Nifty, after opening gap-down, did not fill the morning gap during the course of the trading session. Nevertheless, buying range extension on Monday occurred below the previous value area and, hence, it was a responsive activity from buyers. This is a weak signal.
Technically, the Monday’s gap down has to be filled in the next few days, or it could mean that the current trend would further deteriorate, says Sadanand Raje, technical analyst, Pinc Research. The technical indicators in the medium term and short term are clearly pointing southward. The target on the downside now stands at 4,700 and any break below that could take the Nifty down to the 4,500 level.
The global cues remained an important factor for the market momentum, and hence, it is very difficult to predict the upper or lower price range on the basis of the market picture chart. The MKTP chart suggested an upside resistance at 4,909 and volume-based sell-off could lead to a low of 4,813.
The October futures settled at a premium to spot and, despite trading volume of 20.05 million shares, the open interest (OI) positions remained unchanged. This indicates the entry of new set of players in the derivatives segment.
Options traders covered short positions in 4,800-5,000-strike put and built up fresh short in the same strike call options. The participants, however, expect the Nifty to get support at 4,600-4,700, and hence, they sold the same strike put options. The Nifty may struggle to trade above the 4,900 level on the basis of OI in build-up in the 4,900-strike in call and put options.
