Strong support seen at 5,550

A strong consolidation around 5,595 and a breakout thereafter failed to sustain above 5,650, as other time-frame traders turned sellers at the higher level. The Nifty July futures settled at 5,624, a 12-point premium to spot on account of intra-day short covering of 2.3 million shares. The trade summary matrix (TSM) data hints at sell-side bias in the first two TPO time periods of 30 minutes each and change of hands in the rest of the trading session. The open interest (OI) in the July futures has been unchanged despite a jump in volume, which indicates the entry of new players in the market.

The market picture chart (MKTP) sourced from Bloomberg hints at a volume-based upside around 5,703 and price-based support around 5,550. However, despite a 55 per cent volume above the previous day’s high of 5,609, the

July futures failed to sustain above the upper band of value area (5,576-5,626) and, hence, July futures need to move above 5,650 to achieve the above target.

The downside is very limited and the futures expected to get strong support in Tuesday’s initial balance (IB) range (5,561-5,594). The spot Nifty is likely to face resistance above 5,667-5,679 and is expected to get support around 5,550.

Among key stocks futures, Reliance Industries (RIL) and State Bank of India closed on a strong note while higher level profit booking was seen in Tata Motors, Infosys and ICICI Bank. The July futures of RIL settled above the value area and saw unwinding of 356,500 shares in OI, indicating short covering at the higher level. The MKTP chart hints at a price level of 890 for RIL and support around 863. Infosys expected to face resistance above 2,768.

The trading pattern in the Nifty 5,600-strike call and put indicates unwinding of short positions in call options and fresh short build-up in put options. Interestingly the 1:1 put/call ratio at 5,600-strike indicate fight between bulls and bears to control 5,600 level.

However, the trading volume in the 5,700-strike call and put options suggests strong possibility of breakout above 5,650 in the near future, as the 5,700-strike call options saw change of hands while the same strike put options added 568,150 shares in OI through sell-side trades.