Strong support at 5,660

As expected, the Nifty moved between support and resistance due to lack of interest among floor and day traders. The index closed at 5,991, the crucial resistance level for the bulls, who expect a strong pullback after the Reserve Bank of India’s (RBI’s) policy on January 25. The market is likely to stay in the 5,660-5,757 range and any breakout is not expected to sustain. If the Nifty closes below 5,630, it will get support at 5,500. Any breakout above 5,757 is likely to face strong resistance at 5,820.

The point of control (PoC), which identifies the price level at which the market has spent the most time trading, has been seeing multiple distributions of time-price opportunities (TPOs) in the past few trading sessions. This clearly indicates that participants are unable to locate the best value for the market to get stability. However, there is sign some price stability may return in the coming days, as the midpoint, the halfway between the high and the low of a given picture, has been below the PoC in the past three trading sessions.

The initial balance range (IB), which has been used exclusively by institutions and commercial traders as support or resistance, is hinting at some recovery. The range saw significantly high volume, mostly in the form of buy trades, indicating short-covering. The value area also saw strong buy trades in the range in the last couple of trading sessions as participants expected that the market might not fall sharply from the current level.

The market picture chart suggests that the Nifty futures may see volume-based upside around 5,807 and get TPO-based support at 5,660. The spot Nifty is expected to get TPO-based support at 5,660 and volume based resistance at 5,760. There was profit-booking in the 5,700-5,900 put options, which hints at strong support at the 5,660 level. The traders bought the 5,700-strike call and did some short-covering in the 5,800 call options. However, build-up of open interest in Nifty calls and puts indicates selling pressure above 5,700 and support below 5,600.