A consolidation in the previous day’s initial balance (IB) range (5,550-5,594) ended with a vertical move in the last 60 minutes on account of short covering from other time-frame traders. The Nifty futures, though closed at 5,600, the volume declined significantly by over 10 million shares. This clearly indicates the bear’s control of the trend and the rally was mostly part of strong global cues. Nevertheless, as long as the Nifty remains below 5650, the short-term outlook will remain weak.
Nifty futures settled at 5,600, a 15- point premium to spot and shed around one million shares in open interest (OI). The trade summary matrix (TSM) data indicated change of hands, but buy-side traded above 5,590. The trading volume was significantly higher (75 per cent) above the previous day’s upper band of value (5,575) and, hence, the price band in the IB range was used for short covering by other time-frame traders. The value area (5,568-5,592) saw 70 per cent volume through buy-side trades.
It was a net buying day as the TPO counted above Point of Control (PoC-5,584-5,586) was 34 per cent compared to 58 per cent of the TPO counted below (PoC). The range extension between 5,580-5,610 was mostly through sell-side trade and hence closed above 5,650, could maintain the uptrend.
The support at IB range is very important to keep the bears at the sideline. For tomorrow, the volume target is seen around 5,647 and if the Nifty futures slip below 5,550, it can revisit 5,503. The spot Nifty had good resistance around 5,607 and support around 5,533.
The strong upward movement for the index heavyweights such as Reliance Industries, HDFC Bank and ITC is likely to continue tomorrow. These index drivers closed above the value area and the day’s significant short covering. Reliance is expected to move up around 875-880 with lower end support pegged at 862. HDFC Bank can rise up to 2,555 with support is seen at 2,516. ITC is poised to move up around 208 while support is seen around 203.
The optional participants covered up short positions in 5,600-strike call options and built-up fresh short at same strike options, as they expected upward movement around 5,650.
The open interest (OI) built-up in the 5,500-strike put options and 5,700-strike call options suggested support and resistance levels.
