The Nifty May futures moved in a narrow band and settled in a Doji pattern on a closing basis on account of buyers/sellers equilibrium. A Doji forms when the opening price is the same or very near to the closing price. The Doji on Wednesday had a relatively tight range from high to low (5,312-5,268) and volume in the June futures also declined by five million shares as participants were unwilling to enter fresh trade.
The market profile classification suggests a non-trend day that rarely occurs and involves the day trader more than another time-frame trader. Yesterday, in the column, we had talked about lacklustre trading and range-bound movement. The Nifty June futures moved between resistance and support and settled in the middle of the range. The Trade Summary Matrix data suggest buy-side trade and, hence, short covering.
The market is said to be at balance in a non-trend day and is often a signal of a new vertical move.
However, the open interest (OI) build-up in the Nifty put and call options hints at a normal trading session tomorrow. The Fed meeting on Quantitative Easing 3 tomorrow will decide the interest rate play. Comfort is expected from the Fed extending its financial support and softening stance on crude oil.
Nevertheless, the Nifty is expected to face strong resistance above 5,300 and significant support around 5,260.
The buy-side trades and 80-85 per cent volume in the initial balance range (5,276-5,308) and in the value area (5,278-5,300) suggest strong consolidation at those levels. The participants also covered short positions around 5,290 and, hence, the Nifty has very limited scope to move down from the current level.
The Nifty May futures closed at a five-point premium to spot and a long build-up of 771,600 shares in OI. This was a positive move from the bulls, who expect strong consolidation around 5,300 and a fresh up move if the Nifty closes above 5,330 with strong volume. The Nifty may face strong resistance at 5,350 and around 5,380 thereafter. The support is expected to come around 5,265.
The options traders have covered up short positions in the 5,300-strike call and have built up significant short positions in the 5,300-strike put. A significant OI build-up was seen at the 5,200-strike put through sell-side trades. This means the Nifty is expected to trade above 5,300 and is unlikely to move below 5,200 on Thursday.
