Expect resistance around 5,774

The tussle between the bulls and bears for supremacy ended on Thursday in favour of the bulls, as the Nifty broke-out of the trading range and closed above the most crucial resistance at 5,717. We had indicated in this column that a break of 5,690-5,717 would lead to a strong rally into 5,800. The July futures settled at 5,745, and the bulls are now likely to go for 5,800. However, the risk thereafter is a gradual reversal into strong support at 5,560.

The market saw a buying range extension as the Nifty moved above the initial balance (IB) (5,641-5,674), the range determined by the floor traders in the first hour of trading. The buying extension has occurred above Wednesday’s value-area, and it has given a strong buy signal. The lower time price opportunity (TPO) counts above the point of control (PoC-5,708), versus the TPO counts below the PoC hints at active buying from other time-frame traders and, hence, a net buying day.

The strong momentum is expected to continue till the Nifty hits the upside target of 5,800. The volume-based buying range extension in the last two and half hour session is expected to take the Nifty around 5,803, the market picture chart suggests.

The selling pressure would take back the Nifty July futures into 5,661, and that would be the lower-end support for the short term. The spot Nifty is expected to get resistance at 5,774 and support at 5,661.

The volume in the IB range was significantly low, 20 per cent, and, hence, the Nifty may not go below the IB range in the immediate future.

The trade summary matrix, or data, on the indicative buy-sell bids indicate sell-side bias and short-covering from top traders. The July futures settled at 5,750, a 21-point premium to spot, and added 923,650 shares in the open interest (OI), indicating a long build-up.

Among stocks futures, Reliance Industries, Larsen & Toubro and ITC moved up on short covering and fresh long build-up. The momentum is expected to continue tomorrow, with price target for Reliance seen at 891, Larsen & Toubro, Rs 1,921 and ITC, Rs 208.

The options traders turned buyers in the 5,600-5,700-strike, mostly to cover short positions.

The 5,800-strike call options added 1.30 million shares in OI through sell-side trades, and, hence, a strong resistance is seen above 5,800. The sell-side open interest build-up at 5,600-5,700-strike put options indicates a short-term support.