Resistance around 4,700 is still intact

The Nifty moved in a narrow range and ended in a Doji pattern, indicating uncertainty among market participants and a breakout on either side.

A Doji Pattern is formed when stocks end at the same level in successive trading sessions, indicating that the bulls and the bears are at an equillibrium, a state of indecision. Options traders expect the index can break out on either side of 4,600 and so bought 4,600 strike call and put options. Technical support for the index is seen at 4,500 and resistance at 4,730. However, the 4,700 call witnessed a trading volume of 14.56 million shares, mostly through change of hands, as few traders expected a rise from the current levels.

The Nifty August futures closed at a marginal premium to the spot while premium to the September futures declined from 16 points to 10 points. The rollovers in September futures were at 3.54 million shares compared with unwinding of 3.80 million shares in August futures. Bloomberg data suggest profit-booking in August futures above 4,665 and a long build-up in September futures when the index was trading above 4,665. The rollover at these higher levels means fresh rally above 4,730 in September.

The Nifty is expected to trade between 4,600 and 4,700 during the expiry of the August series as 4,600 holds the highest open interest in put options and also because traders have been writing the 4,700 strike put in the last few days. According to a technical analyst at Angel Broking, if the Nifty trades convincingly above 4,656, it is likely to test 4,700-4,730. However, on the downside, 4,580-4,550 may act as support for the day. Resistance around 4,700 is still intact and therefore profit-booking is advisable around this level.