Possibility of a minor pullback in the near future

As expected, the Nifty closed below 4,950 on account of weak opening of European markets and selling from top traders in the initial balance (IB) range. The short-term indicators are now turning weak, with the next technical target on the downside for the Nifty, expected to be around 4,800. There is no bullish set up at this stage for extension beyond 5300, but if the Nifty managed to hold Monday’s low of 4,911, there is a possibility of a minor pullback around 5,000, in the near future. According to Moses Harding, head of Global

Markets Group, IndusInd Bank, the next three to four months is the time to stay invested for good returns on shift into 2012.

The Nifty September futures opened gap-down, and after moving below the most crucial support at 4,950, it tested the lower end support at 4,900 in the process. A late recovery ensured a closing at 4,946, marginally below the most crucial support level. The trade summary matrix showed buy-side bias, but a strong selling pressure from top traders. The floor traders changed hands in the first two time price opportunity (TPO) periods of 30 minutes each while net buying was noticed in the value area in the range of 4,920-4,950. The IB (4,948-4,979) range established by floor traders showed buying in the morning session and selling pressure in the afternoon when the Nifty slipped below 4,950.

The market undercurrent turned bearish and that could take the September futures around 4,880 this week. The September futures traded at discount throughout the day and added 2.70 million shares during intra-day, indicating short build-up. The futures finally settled at 4,942, adding 936,200 shares in open interest in the end, indicating carry-over of short positions.

It was also a net selling day as the Nifty closed below the point of control (4944), with 52 per cent TPO counts below that level. The September futures also closed within value area, after getting a significant support at 4,901. The market picture chart hinted at volume-based selling for the September futures, at around 4,880. However, the pullback, if any, on account of short covering would take the index to around 5,000, the MKTP chart suggested.

The options traders booked profit in 5,100-strike call, build-up fresh short in 5,200-strike call and covered same strike put options.