Breakout above 5,300 likely

The Nifty faced resistance around 5,300 as futures and options (F&O) participants booked profit at higher levels. Also, a narrow range for the third consecutive session indicates indecisiveness at current levels.

Technically, if the Nifty convincingly closes above 5,280, it is likely to test 5,330. The Nifty closed the day at 5,275 after facing resistance at 5,290. Nifty January futures closed at 5,271, a three-point discount to the spot, indicating profit-booking at higher levels. The futures shed 519,450 shares in open interest, mostly through change of hands in buy-side trades, indicating short-covering by bears.

There was profit-booking in call options at 5,300 and below as only seven trading days are left for expiry of the current month’s series.

However, traders built fresh long positions in 5,400 and 5,500 strike calls on expectation of an upward breakout soon. According to Gautam Shah, a technical analyst at JM Financial, the resistance level of 5,300 holds a lot of importance based on historic tops and bottoms, trendline studies and the wave theory. The set-up on the daily chart hints at a breakout above this early this week, which will bring momentum back and accelerate the rise to 5,370.

Put options traders built fresh positions in 5,300 put options despite that fact that only seven trading days are left for expiry of this month’s series. This means the participants expect the Nifty to move above 5,300 and stay above this on the last day of the expiry.

Strong support continues around 5,200 as this strike put holds the highest open interest among all put options. Interestingly, 5,400 and 5,500 puts saw a decline in open interest, mostly through sell-side trades, indicating profit-booking.