Room for further upside this week

The S&P CNX Nifty has closed above the 4,500 levels while June futures remain at a premium to the spot, an indication that the current uptrend will continue.

The low trading volume in the Futures & Options segment suggests that bears were absent from the trading ring as the Nifty remained above the 4,500 levels throughout the day after a gap-up opening. We may expect the index to cross the 4,650 levels soon and then some profit booking from the bulls. Technically, despite being overbought on a few studies, the indices are still about 3 per cent away from important resistance levels and hence there is room for further upside this week.

Daily technical indicators are in a buy mode while the 14-day RSI, which is above 80, is in the process of creating divergence. Overall, with the uptrend staying intact, the indices are likely to rally further, and the BSE Sensex crossing the 15,100 levels and the Nifty moving above the 4,650 levels this week is possible.

Though the 4,500 level has resistance due to the highest build-up in call option, we may see support building around this level going forward.

This is because the weaker hands have been removed from the 4,500 call intra-day in the past few trading sessions while the bears have used this call to hedge their earlier short positions.

Fresh build-up of open interest (OI) is observed in 4,800-5,000 calls as traders have taken long positions in the out-of-the-money call as the current rally is not cooling off.

The support for the Nifty is seen at 4,200 levels, but a certain section of options traders believes that the Nifty can find fresh support at 4,400-4,500 and hence they were seen writing puts at theses levels.