Market heads for overbought zone

F&O OUTLOOK

The open interest was up by 8.50 per cent at close and a marginal one per cent after the half-hour closeout. This shows that intra-day short positions were squared off in the last trading hour.

The current pullback is likely to end soon as the market is trading in flag patterns. With the Nifty flag trading between 4800 and 5350, the index can make a high of 5,350 and a low of 4800 in case of a reversal. Technically, flags result from price fluctuations within a narrow range and mark a consolidation before the previous move resumes.

The market strengthened from around 4800-4900 levels in the April month contracts and is trading above 5100 in the last three days of the May contracts. The Nifty made an intra-day high of 5280 on Wednesday, which is just shy of our resistance level of 5300.

The Nifty 5000 put option has added significant open interest and out-of-the money calls have also shown a rise in open interest. Like yesterday, call buying was seen at the strike prices of 5000 and 5100 and call writing took place at 5200 and 5300 strike prices. This indicates that Nifty has a support at 5000-5100 and resistance at 5200-5300 levels.

The Nifty PCR moved up further from 1.39 to 1.48 as the Put OI increased by 26.2 lakh shares and the Call OI rose by 9.15 lakh shares. The market is heading toward the overbought zone, going by the rise in PCR.