The Nifty failed to break resistance at the 5,470-level in three consecutive sessions last week before finally closing in a Doji pattern on Friday. This indicated indecisiveness at higher levels. In the US, the Dow Jones recovered on Friday from steep losses and closed in a Doji as analysts said investors hunted for bargains before the market closed ahead of the weekend.
According to the trading pattern in the derivative segment, foreign institutional investors (FIIs) went in for short-covering in the Nifty futures and profit-booking in index options and stocks futures on Friday. The SGS Nifty closed at 5,404 in the over the counter (OTC) facility, which indicates a soft opening on Monday.
A fresh build-up was seen in open interest (OI) in the 5,200-strike put and there was some unwinding in the 5,300-5,400-strike put, which indicate a possible breakout below 5,420. The 5,500-strike put has added 176,050 shares in OI, mostly through buy-side trades. This shows there has been some hedging of long positions. The trading volume in the derivative segment continued to be uninspiring. This indicates derivative participants are playing a waiting game, in favour of a breakout from the trading zone.
The futures closed at a premium to spot on Friday and shed two million shares in OI from an intraday build-up, suggesting some short-covering from bears. According to a market picture chart, there is some resistance above 5,499, based on time-price opportunity (TPO). Some volume-based support is expected to come in at around 5,421. Traders booked profit in the 5,500-5,600-strike call options on expectation of a strong resistance in the Nifty above 5,500. The 5,400-strike call saw a fresh build-up in OI, mostly through sell-side trades, as participants expect the Nifty may slip below 5,400 if it closed below 5,420 in the near future.
On the weekly chart, the Nifty moved in a narrow range in the last three sessions and closed around its volume-based support area on short-covering below 5,450 and profit-booking above 5,470. The weekly market picture chart shows a long build-up in the value areas (5,404-5,460).
