The Nifty has closed in the red for five straight sessions on account of volume-based selloff, with no support at any level. The Bombay Stock Exchange Sensex and the S&P Nifty have hit six-week lows, but the bearish sentiment refuses to die down.
Volumes in Nifty futures have risen significantly in the last three trading sessions while open interest in January futures has remained static, hinting at short build-up by new players. Hence, any bounce-back on account of short-covering is likely to be derailed around 5,900.
The initial balance (IB) range, the first two time-price opportunities (TPO) periods of 30 minutes each established by liquidity providers, saw sell-side trades in the range of 5,852-5,902. No wonder, despite an intraday build-up of 2.75 million shares, open interest in January futures remained unchanged at 20.43 million shares.
The selloff in the IB range suggests it is a major resistance level as Nifty futures have opened below the lower band of the range and remained below that level for six straight trading sessions. The value area also saw change of hands, indicating that participants are not accepting that range as well.
The market picture chart for the day hints at a level of 5,917, based on TPO and volume projections. However, an intraday selloff around 5,850 can take Nifty futures to around 5,735, the TPO projections suggest. Nevertheless, the volume-based correction from Friday’s high of 6,062 can take the Nifty to around 5,599, the volume picture chart indicates. The spot Nifty is expected to witness strong resistance around 5,907. On the downside, the index may fall around 5,617.
Call and put options data show huge build-up of open interest in the 5,800-6,000-call options. The 5,700-strike call options added 1.08 million shares in open interest, mostly through sell-side trades.
On the other hand, there was unwinding in the 5,900-6,100-strike put options. The 5,600-5,700-strike put options also added considerable open interest. This clearly indicates a weak undercurrent, with the index moving down to around 5,600 in the near future.
