Weakness on the cards

F&O OUTLOOK

The Nifty has recovered from its day's low in last three consecutive sessions. The day's close of 5,184 is below the 20 days moving average of 5,249 and indicates weakness. The next target would be 4,895, which is 39 days moving average.

The market is bullish above 5,250, but there is intra-day resistance at 5,300. The long-term support for Nifty is 5,000, and a break below this could lead to panic.

The Nifty October futures closed at discount of 10 points, which Nifty November futures closed at discount of 26 points. This indicates the bears have short positions.

The Nifty Put/Call ratio OI remained unchanged at 1.14 as Put options added 10.40 lakh shares, while Call options added 7.96 lakh shares in open interest. The five days relative strength index (RSI) at 31 indicates that the market is moving toward oversold positions.

The trading activities in call and put options indicate that operators are writing out-of-the-money Calls and booking profits in in-the-money Calls.

Fresh Call writing is seen at Nifty strike prices of 5,200 (OI up by 3.64 lakh shares) and 5,400 (+2.59 lakh shares). Strong Put writing was seen at 5,000 (+3.18 lakh shares), indicating strong support at this level.

According to an analyst at Kotak Securities, the broader trend of the market is still positive and intact. However, at current levels, one cannot trade with a long-term view in mind. Investors can accumulate selective stocks at dips in the region of 16,500/16,700.

As the fall from 19,200/5,740 has been vertical, 16,600/4,850 may act as a crucial support for the market.