Fresh shorts indicate weakness

F&O OUTLOOK

Bull exhaustion has begun to show, with the benchmark indices slipping below crucial support levels. The Nifty closed at 5100 after hitting an intra-day low of 5060, while the Sensex ended below the 17,500 mark at 17230.

There was also weakness in the options market, with buyers of in-the-money calls and sellers of in-the-money puts covering their positions on Tuesday. The 5000 call options witnessed short-covering. With call writing taking place at the strike price of 5100, the Nifty is likely to trade below this level in the near future.

Put writers covered their sell positions at 4900 and 5000 strike prices as the open interest at these levels declined by around five per cent each although buying outstripped selling. The 4800 level, which acted as a strong support for the Nifty in the current month series, seems to be holding forte for the time being.

However, the trading volumes of 4800 put remained subdued due to the weak undertone. According to technical analyst Ashish Shroff of Ambit Capital, the Nifty witnessed "bearish moving average crossover" on the daily chart this week as the 10DMA (5070) crossed the 20DMA (5090), signalling a bull trap. Once the 5090 mark is violated on a closing basis, the Nifty may go into a free fall and break the 4940 level.