Upward bias only if Nifty crosses 4,350'

The Nifty managed to hold support at 4,250 but failed to close above 4,350 due to profit-booking at higher levels. Though the spot Nifty closed at 4,340, the July futures changed hands at an average of 4,314, indicating that speculators were wary of trading at higher levels.

Though it is difficult to predict where the market is heading now, an upward bias will begin only if the Nifty closes above the 4,350 level.

According to analysts at HDFC Securities, the recent journey of Sensex and Nifty has created an ‘evening star’ pattern on three occasions, including today. On the two previous occasions, it had given a ‘false signal’ with the indices trading above the previous day’s lows to continue their rally. However, today, both the indices fell below their previous lows but closed above the day’s lows. This means the current uptick will be intact till the Sensex and the Nifty close below 14,420 and 4,250, respectively.

The Nifty July futures closed on a par with the spot and added an open interest (OI) of 84,350 shares, indicating that traders used the pullback to book profit at higher levels. The Bloomberg data suggested that traders booked profit when the Nifty crossed the 4,350 level. In fact, almost 62 per cent of the total trade changed hands at an average index level of 4,340 and the remaining 38 per cent at 4,280. Profit-booking was witnessed in the 4,300 and 4,400 calls as they together added an OI of 412,950 shares, mostly through sell orders.

The 4,500 and 4,600 calls too witnessed change of hands as OI in these calls increased marginally by 2,36,550 shares despite a trading volume of 8.84 million shares. The 4,700 level continues to offer strong resistance as this call holds the highest OI among all call options. However, buying opportunity is seen at 4,200 levels as this strike put holds the highest OI among put options.