Nifty may cross 4,850 next week

The Nifty has now closed below the resistance level of 4,850 for three consecutive sessions due to profit booking at higher levels. However, it closed above the trend changing level of 4,807 in all the three sessions, indicating continued uptrend as long as the Nifty maintained this level. The trading pattern in the derivatives segment suggests that the index may close above the resistance level of 4,850 next week. Technical analysts expect a fresh rally with an upside target of 4,950-5,000 in coming days.

The Nifty September futures witnessed short covering below 4,821 and profit booking above 4,845. The September futures closed at a premium of 6 points to the spot and shed 199,900 shares in open interest (OI), indicating short covering from bears. The intraday trading volume suggests that the bulls have created fresh long positions, while the bears were covering short positions when the index moved above the 4,825 level.

Foreign institutional investors (FIIs) have formed long positions in the index futures and the stock futures during the week ended September 11 as the open interest in index futures went up from 581,039 contracts on Monday to 608,955 contracts on Thursday, mostly through buy-side trades. FIIs were seen hedging long positions through put buying, which suggested that they were expecting strong momentum going forward.

A significant build up is witnessed in the 4,900 call option and 4,700 and 4,800 put options. The 4,900 call option holds the highest OI among call options, while the 4,600 put holds the highest OI among puts. This means the Nifty has support at 4,600 and resistance at 4,900.