Lower end support seen around 5,360

F&O OUTLOOK

As expected, the Nifty May futures saw a strong consolidation around the previous day price range (5,525-5,545) indicated by point of control (PoC), the area of most traded price.

However, the weak opening for the European markets saw other time-frame traders entering the market with an intention to sell. The initiative selling at the initial balance (IB) range by them breaks the Nifty below 5,500, and continued selling pressure saw break of price-based support of 5,480. The Nifty future closed at the day’s low with no support coming in even at the lower level.

The market on Thursday witnessed a rare type of profiles, the double distribution. This profile starts generally as normal day, complete with a tail and a range extension, which provide direction and evidence of the activity of the other time-frame trader. The IB is generally in the average range. No wonder, the market picture chart (MKTP) shows only 32 per cent volume in IB range and significantly higher, 68 per cent volume by other time-frame trader. So, this profile tells us the market is accepting lower prices and rejecting IB range.

The price acceptance in the double distribution profile suggests continuation in the same direction. The trade summary matrix (TSM) data suggest sell-side bias from other time-frame trader, indicating some shorts even at the lower level. The May futures confirm this as they closed at par to spot, and added 1.05 million shares in open interest. The market is looking for a breakout from the current trend and Thursday’s formation hints at a breakout below 5,400.

The market picture chart, which provides an insight into where the fair value is and who is controlling the markets, hints at a volume-based decline around 5,362. However, an upside resistance is seen around 5,623. The spot Nifty may face resistance above 5,622 and is expected to get strong support below 5,410. The May futures of Bank Nifty is expected to face resistance above 11,130 and volume-based support at 10,470.

The May futures of the State Bank of India are likely to face price-based resistance above 2,652 and expected get volume-based support at 2,572. ICICI Bank may get support at 997 while Reliance Industries is expected to see buying coming in below 940.