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Markets set to open in the green today

B G Shirsat  |  Mumbai 

Nifty January futures staged a smart pullback after flirting with the November 26 low on account of short-covering at lower levels. A close above 5,800 is likely to be a morale booster for the bulls, who have been slaughtered in the last seven trading sessions.

The futures closed within the initial balance (IB) range after six days, indicating that floor and day traders covered intraday short positions. The value area saw change of hands and 70 per cent volume in time-price opportunities (TPO) periods, hinting at short-covering by positional traders.

Nifty January futures saw significant unwinding of short positions over an intraday build-up of 2.65 million shares. The futures closed at 5,808, but the official settlement price was put at 5,770 to accommodate the fluctuation during the last 30 minutes. This means the market will open on a positive note tomorrow.

Volumes in Nifty futures increased sharply in the last 30 minutes (almost 22 per cent), as the index staged a dramatic recovery from a low of 5,700 to close at 5,808. The open interest in January futures fell by 823,150 shares, hinting at short-covering by bears.

The IB range saw buy trades in the range of 5,756-5,808 after six trading sessions. Buying in the value area and the IB range suggests participants and liquidity providers expect the market to stabilise around their current levels. The market picture chart for the day hints at a level of 5,905, based on the TPO data. The volume picture chart indicates resistance around 5,925. The spot Nifty is expected to find support around 5,673-5,636, according to TPO projections. Nevertheless, the 5,690 support has to hold to prevent extension of weakness into the next support zone of 5,400.

Call and put options data show unwinding of short positions in the 5,800-6,100-strike puts and the 5,900-6,100-strike call options. The 5,700-strike call options added 1.04 million shares in open interest, mostly through change of hands, hinting at hedging of naked short positions. The 5,500-5,700-strike put options also added considerable open interest through sell trades, suggesting strong support below 5,700.

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First Published: Wed, January 12 2011. 00:47 IST