The Nifty August futures closed almost 100 points lower, following a volatile trading session on weak global cues. Technically, the relative strength index (RSI) at 35 suggests extremely over-sold positions and raises the probability of a pullback or a consolidation from the existing levels. The market picture chart hints at a possible pullback at around 5,220. However, if the global markets remained weak, volume-based selling could take the August futures to around 4,975. The market profile for the day suggests a buyers/sellers equilibrium with the August futures closing at midpoint of trading range.
The market undercurrent continues to be weak, as key losers closed below the day’s value area. The options participants expected the market to remain weak and covered their short positions in the 5,300-5,600-strike put options and build-up fresh short positions in the 5,100-strike call options.
The open interest (OI) build-up at 4,700-5,000-strike put options through buy-side trades indicates the possibility of touching the sub-5,000 level for August futures in the near future. The only positive data point has been the significant recovery in August futures from the day’s low, closing above the initial balance (IB) range.
The August futures settled at a eight point premium to spot, and despite a trading volume of 32.27 million shares, open interest (OI) increased marginally by 538,500 shares. The trade summary matrix (TSM) suggests a change of hands in the IB range indicating the entry of new time-frame traders.
The August futures witnessed selling pressures above 5,118 and significant buy-side trade below 5,090. The MKTP chart suggests a price base decline of around 4,950 and are expected to face strong resistance above 5,219.
Key stocks’ futures that dragged the index down to around 5,055 are expected to see some corrections in a day or two. TCS may see volume-based decline around 969, and resistance around 1,045. Reliance Industries is likely to face resistance above 878 and volume-based decline around 765. Tata Motors is expected to move below 800 and may face resistance above 871. HDCF Bank may weaken further to around 445 and is likely to face resistance around 483.