Breakout below 5,400 unlikely

The Nifty moved between support (5,400) and resistance (5,505) and closed in a Doji pattern, indicating indecisiveness at the current level. The Nifty February futures closed at a 13-point premium to the spot after witnessing significant change of hands among floor and positional traders. The derivatives data suggest selective buying in futures of index heavyweights such as Tata Steel, Larsen & Toubro and State Bank of India. The participants booked profit in private banks and pharmaceutical companies.

After a significant recovery in the past three sessions, the Nifty moved in a narrow range on lack of interest at higher levels. The Nifty is expected to trade at 5,450-5,490 in the near future. The market may not see any significant correction, but an upside movement has too many hurdles. The support is seen at 5,440 and a breakout below 5,400 is unlikely. On the upside, strong resistance is seen at 5,510-5,550. Also, a close above 5,570 is crucial for bulls to gain control.

The trade-summary matrix data indicate change of hands in the value area and in the initial balance (IB) range (5,470-5,496). The volume in the IB range was significantly higher, 80 per cent, compared to below 50 per cent in the past three trading sessions. The Nifty futures, which settled at a premium, added 147,750 shares in open interest. So, we need to know the set of new positions that have been built in the IB range to indicate future trends. Normally, the higher volume in the IB range is followed by a significant weakness.

The market picture chart hints at an upside resistance at 5,530-5,565 and lower-end support at 5,445. The spot Nifty is expected to get time-price opportunities-based resistance at 5,557, while volume-based support is seen around 5,410. The Nifty February futures saw strong selling above 5,496. The three days trading in February futures hints at an upside of 5,660 if the 5,565 resistance is broken. Strong support is seen at 5,445.

Options traders have been continuously unwinding short positions in calls above the 5,300-strike price on expectation of a limited downside from the current level. The significant open interest build-up has been observed in the 5,300-5,500-strike put options, which indicates a strong undercurrent.