Nifty may get strong support at 6,000

As expected, the Nifty January futures witnessed heavy selloff above 6,200 and closed on a bearish note around the support level. Reliance Industries gained around two per cent, arresting a significant fall in the Nifty that was activated because of profit-booking in ICICI Bank, State Bank of India, Tata Motors and Tata Steel.

The futures closed around the lower band of the value area (6,158-6,188), signalling a weak undercurrent. Although the market picture chart did not point at any major weakness, the intra-day selling pressure may take the index to around 6,100 in the near future.

The trade summary matrix indicates buy volume in the value area and also in the initial balance (IB) range (6,154-6,205). We had indicated the Nifty would find it difficult to trade above 6,180 because of selling pressure at the higher level. Intra-day trading saw 29 per cent volume, mostly sell-side, above 6,188. Hence, the Nifty retreated sharply from 6,209 to close at 6,160.

The IB range, the first two time-price opportunities (TPO) periods, saw significantly high volume (92 per cent), which hints at a selloff by day traders and liquidity suppliers.

The market picture chart for the day hints at a level of 6,127 on the basis of TPO projections. The volume picture chart suggests strong resistance above 6,207.

However, volume-based selloff in the last two hours can take the Nifty to around 6,107, while the TPO-based support may be around 6,127. However, selling pressure at the higher level is likely to continue for some more time, as data show 85 per cent volume above the day’s close, indicating traders have rejected these levels. Hence, 6,180 may act as a strong resistance level. If a security closes below its low-volume area, the level may prove to be a potential resistance point in the future.

The trading pattern in Nifty call and put options suggests the index may face strong resistance above 6,200 and support at 6,000. There is possibility of a breakout below 6,100 in the near future, as the 6,100-strike call options has witnessed a fall in open interest in the last two trading sessions through sell-side trades. The intra-day volume bar shows 90 per cent volume above the day’s close in the 6,000-6,300-strike call options, which hints at a significant weakness in the market.

Trading in Nifty puts suggests strong support at 6,000 and loss of support at 6,100.