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| Momentum likely to continue |
| B G Shirsat / Mumbai Sep 09, 2010, 00:08 IST |
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As indicated, the Nifty maintained its support and resistance levels (5,562-5,624), before closing at 5,607 due to short-covering at lower levels. The trading volume in the Nifty futures and options hints at a rally around 5,650. The market picture chart showed strong buying from bears in the post-noon session when the Nifty convincingly crossed the initial balance range (5,565-5,585) — the first two time-price opportunity (TPO) time periods, created by liquidity suppliers.
The short-covering from bears and a positive opening in European markets saw the futures moving up to the day’s high of 5,623.80. This momentum is likely to continue with the Nifty expected to move past the day’s high on Thursday.
The Nifty September futures closed at a discount to spot and, despite a trading volume of 19.46 million shares, only 83,100 shares were added in open interest (OI). This clearly indicates an unwinding of short positions from bears. The market picture data showed significant buy-side trades – mostly during the post-noon session – between 5,585 and 5,610 levels. This volume-based short-covering is expected to take Nifty to around 5,623-5,630 when the market opens for trading on Thursday.
Options traders covered short-positions in the 5,500-5,700-strike calls on expectation of the Nifty sustaining above 5,600 in the near future. The unwinding of short positions was significant in the 5,500-strike call, while a long build-up was seen in the 5,600-strike call. Interestingly, the breadth of the current rally is expected to be very high as traders also covered short positions in the 5,700-strike call. Put writing was seen in the 5,600- and 5,700-strike puts, raising OI by 1.20 million shares, mostly through sell-side trades.
According to IndusInd Bank Head (Global Markets Group) Moses Harding, as of now, the reversal from the resistance level of 5,620 has held well with immediate support at 5,560. The market looks good for test at 5,680-5,700, before any significant reversal sets in. Such reversals are dependent on any weak US economic data or exit of off-shore “hot money” on profit-booking and who have already lost a good rupee level at 46.50 for repatriation. It would be in order to allow a bit of correction. Hence, they would prefer not to chase gains beyond 5,620.
Among stocks futures, State Bank of India is poised to cross Rs 2,900 once again, according to TPO and volume data. The September futures of SBI closed at Rs 2881.85 with an increase of nine per cent increase in OI. TPO data indicates a strong rally in SBI stock around Rs 2,933.
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