Expect limited upside from current level

As expected, the Nifty failed to breach the 5,490 resistance on poor volume and profit-booking at higher levels.

August futures moved in a narrow range and saw short-covering in value areas (5,450-5,475) and more sell trades in the closing session. In the end, the futures closed at a marginal discount to the spot and added over a million shares in open interest, indicating short build-up at higher levels.

The market picture chart shows only 50 per cent volume in value areas and around 70 per cent time-price opportunity (TPO) time period of 30 minutes each. The point of control (POC), meant to identify the price level where the market spent most time trading, saw multiple distribution of TPO in the value area. This means the participants are unable to define the correct price level for an intra-day trading strategy.

August futures traded above the first two TPO time periods (indicated as the initial balance) throughout the day as participants started covering short positions on account of strong opening of the European markets. However, TPO data suggest the Nifty has very limited upside from the current level and may face strong resistance above 5,505. The volume-based support is expected to be around 5,433.

The trading in Nifty options suggests profit-booking in 5,400-5,500-strike calls in the morning session and short-covering immediately after the strong opening of the European markets.

Traders covered short positions at the 5,600-strike call on expectation of an upside breakout in the near future. The 5,400-5,500-strike puts saw fresh open interest build-up, mostly through buy trades, indicating hedging of long positions.

Among stock futures, ICICI Bank rose 2.9 per cent while State Bank of India (SBI) was up 1.2 per cent on short-covering and build-up of long positions. The August futures of ICICI Bank added 491,000 shares in open interest, mostly through buy trades.

The price projection using the most-traded TPO time period indicates a price level of 992-997 for August futures of ICICI Bank. SBI closed at 2,635, up 1.2 per cent, on strong volume of over 71 per cent above the POC level of 2,630. TPO data indicate narrow band movement for SBI with strong resistance above 2,650.