Volume-based upside around 5,571 level

The benchmark indices, BSE Sensex and S&P CNX Nifty, bounced back from Tuesday’s selloff to close above immediate resistance levels on short covering. However, the trading formation indicate non trend day as it has narrow initial balance (IB) range and value area. The volume in IB moved up sharply at 65 per cent from 38 per cent on Tuesday. The value area (5,506-5,538) saw 73 per cent volume and 70 per cent time price opportunities (TPOs) through change of hands indicating strong consolidation. Interestingly, a non-trend day is often a precursor to a new vertical move.

As expected, the Nifty March futures gained ground as the IB range saw initiative buying from the floor traders. The future also achieved our mentioned target of 5,542, but faced resistance around 5,555. There was price rejection above the IB range as there was responsive selling from traders above 5,538. The March futures, however, closed below the selling level but within the IB range, which was above Tuesday’s value area. Normally, if the buying range extension occurs above or within the previous value area, then it’s an initiating buying range extension. It’s a strong buy signal. The market continued to throw bullish or a strong recovery signal as there has been lesser selling pressure above the point of control (PoC) in the last few trading session. The TPOs count also signal an active buy-side as there are more TPOs in the lower portion PoC than upper portion of PoC. The rally in the Nifty futures is expected to strengthen further with an upside TPOs-based target seen at 5,566-5,575. The spot Nifty is likely to see volume-based upside around 5,571. The support remains at 5,480.

As expected, the Bank Nifty moved above our target of 10,865 to close at 10,983. State Bank of India showed significant strength and closed above 2,613 at 2,642 on short covering. SBI closed on a strong note with significant buying above 2,638. The TPOs and volume picture chart suggest an upside of 2,672-2,682. Reliance Industries witness non-trend day as the stock moved within IB range. This may be a strong signal for fresh upside.

The options data point out fresh open interest build-up at 5,400-5,600-strike put options mostly through change of hands and fresh sell-side trades. The short covering was seen in 5,300-5,500-strike call options. So the options data signals strong undercurrent.