Volume-based support seen around 5,368

The five-day rally has ended around 5,600 on selling pressure in heavyweights like Larsen & Toubro, ONGC, ICICI Bank and Tata Motors. Three index stocks of Anil Dhirubhai Ambani Group tumbled, adding pressure to the markets. We had indicated in this column yesterday about higher level profit booking on account of weak global and domestic cues.

The options traders booked profit in the 5,400-5,500-strike call options in the morning session and then built up fresh short positions after the Nifty fell below 5,480. The 5,500-strike put options saw the unwinding of 3.21 million shares as traders covered short positions on expectation of a fresh weakness next week.

The trade-summary matrix data indicate buy-side trades in the morning session in the form of short covering. However, significant profit booking was seen when the Nifty slipped below 5,530. The sell-off increased immediately after 5,500 was broken and continued till the Nifty lost support of 5,460. The increase in midpoint from around 12-14 per cent of the total trades to 20 per cent today indicates the execution of stop-loss when the index moved below the 5,466 level. No wonder, over 17 per cent trades took place below that level.

The initial balance range (5,560-5,589) saw 25 per cent volume and 17 per cent time-price opportunities (TPOs), which hints at volume-based selling at those index levels. The value area (5,482-5,556) saw short covering above 5,500 in the morning and change of hands below 5,500 in the afternoon session. So, volume and price action in the IB range and value area points out resistance levels for the index in the near future.

The market picture chart indicates resistance above 5,589 and lower-end support at 5,430-5,380. The spot Nifty is expected to get volume-based support at 5,368. The Nifty February futures settled at a discount to spot and saw the unwinding of 2.80 million shares in open interest, which indicates profit booking by bull operators.