Index may open on weak note over US job data

The market is likely to open on a weak note on Monday, in response to the weak closing of US and European stocks on Friday. In late trade on Friday, SGX Nifty settled at 4,996 - 50 points below the official closing at 5,046. The trading pattern in the Nifty September futures suggested a strong resistance above 5,077. Hence, a crossover is necessary to maintain the uptrend. Also, strong support is expected below 5,000.

The trade summary matrix showed buy-side volume (5,002-5,050) in initial balance (IB), a value area of 5,010-5,044 and profit-booking above 5,050. This suggests a strong undercurrent and fresh up-move after the weak opening on Monday. The market undercurrent remained bullish, and that would take the Nifty above 5,100 next week. It is expected to test 5,125, and even move further at around 5,296, as suggested by the market picture chart sourced from Bloomberg.

The Nifty September futures closed in a Doji pattern after moving briefly below 5,000 to settle at 5,047, as the day traders lent strong support at the lower value level. A Doji forms when the opening price is the same or very close to the closing price. The Doji was formed with a lower shadow, suggesting active sellers initially. Once they had dried up (a reaction to some force), the buyers regained all the losses.

The trading pattern in the futures showed buying from day traders, as it had a relatively wide IB and accounted for 90 per cent volume and TPOs. Even though the market was reasonably well-balanced, with a slight bias in the direction of range extension, there was a slight imbalance at higher prices. This trend reflects a strong market in initiative buying and weak in responsive buying. It may rise if there was initiative buying on Friday.

Index heavyweights that had participated in the pullback are expected to provide a major boost to the current momentum. The market picture chart is hinting at a price level of Rs 829-894 for Reliance Industries and Rs 962 for HDFC Bank. The options traders built up fresh short in 5,000-5,100 strike put options and initiated short-covering in the 5,100-5,200 strike call, as participants expected the current rally to extend and go above the 5,200 mark.