Nifty expected to expire around 5,600

The Nifty June futures achieved the 5,600 target and settled above that level on short covering and strong buy-side bias from other time-frame traders. We had indicated in this column in the Sunday edition that the index is poised to move above 5,600 on account of strong undercurrent. Yesterday, we hinted the start of a new phase of the uptrend on account of a Doji pattern that occurred after strong up-day. The market is expected to be stable on the expiry of June series tomorrow. The 5,600-strike put options saw a fresh short build-up of 2.66 million shares at an average premium of 20 a share and, hence, the Nifty is expected to expire around 5,600.

The Nifty moved above the previous day’s high value, got stagnated above that and saw a non-trend session above 5,600. The trade summary matrix data for the day hints at buy-side trades above 5,600, indicating short covering. The trading pattern in June futures also suggests a standard trend day. In a standard trend day, prices constantly move up and there is no interest in moving it in the opposite direction. In this market profile, the market is said to be controlled by other time-frame traders, sidelining floor traders. The strong buying in the initial balance (IB) range (5,565-5,596) indicates the Nifty has little room to move down below 5,565.

The trade summary matrix data, for Wednesday hints at buy-side trades in the Nifty July futures in the IB range as well as in the value area indicating long rollover. The July futures closed at a 19-points premium to spot and added 5.16 million shares in open interest. The rollover in July series at 16.1 million has been lower by around 4 million shares compared to the June series same time last month. This may lead to a fresh short-covering tomorrow and there is a possibility of July futures trading at a high premium. The market picture chart hints at a volume-based upside around 5,640 and price-based resistance above 5,655.

The options traders expect the Nifty to stay and settle above 5,600 tomorrow, and, hence, they covered significant short positions in the 5,500-strike call options and build-up fresh short in the 5,600-strike put options.