The Nifty held on to its support at 4220, which is a 50 per cent retracement of its rally from 3790 to 4650, and closed well above 38.2 per cent retracement. The next retracement level is 23.6 per cent at 4450. The Fibonacci retracement is a very popular tool among technical traders. It is created by taking two extreme points on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6 per cent, 38.2 per cent, 50 per cent, 61.8 per cent and 100 per cent.
There are various other reasons for Friday’s pullback to continue next week. Foreign institutional investors (FIIs) were net buyers in index futures on Friday and have covered short positions too. They have also hedged their long positions by buying out call money options. However, FIIs remained net sellers in the cash segment and continued with short position in stocks futures.
The Nifty September futures traded at a premium of ten points as against a discount of seven points as traders were seen rolling over long position on Thursday and covering short position on Friday. The key index stocks such as Bharti Airtel, ONGC, Infosys Technologies, ITC, NTPC, Reliance Capital, Reliance Infra and Reliance Industries witnessed rising long positions. Short covering was seen in Steel Authority of India (SAIL), Ranbaxy, Suzlon and Unitech. Analyst expects a firm opening for these stock futures next week.
In the Nifty September series, traders were buying out of call money options beginning at strike prices of 4400 to 4700. The highest call open interest (OI) stands at 4400 strike and put OI at 4200. Support for the index was seen around the 4300 and 4200 levels as traders were buying puts at these strike prices.
