The Nifty’s decline of 4% in the first three days from the expiry of the October future was inline with the index’s behaviour during the period of April-July 2009, when the rollovers were followed by an average price change of 4.4%. As we pointed out last week, for the duration of these four months, an average rollover of 65% was followed by a sharp price move that defined the bullish tone of the market. Now that October expiry has showed some analogous development, it is required to be seen whether a bearish tone will be set in the market.
WEAKNESS PREVAILS
Though the Nifty has recovered 2% for the week, barring Thursday, the index’s gains were accompanied by a decline in open interest and volume of the November future, signifying a not so confident stance of the traders. Similarly, the November future closed with an average discount of 5 points for all trading sessions except Thursday, when it closed with a premium of 5.4 points to the underlying index. Moreover, the stocks futures lost about 8 crore shares in the open interest compared to a gain of 2 crore shares in the previous week when the Nifty declined by 6%.
While these observations highlight an apprehensive mood, the index’s rebound from its 100 Day Moving Average (DMA) and a weekly close above the 20 Week moving Average (WMA) indicate that it will be difficult for bears to push the Nifty below the support range of 4700-4600.
OPTIONS’ CALL
In line with this performance, the change in open interest of the November options highlights the support in the mentioned range. For the week, in-the-money 4700 calls have gained the highest open interest of 16.3 lakh shares for any strike on the call side. Likewise, the November 4700 puts have added 16.4 lakh shares whereas 4600 strike have gained the maximum open interest of more than 24 lakh shares on the put side during the week.
Meanwhile, November 4900 strike hold the highest open interest (41.2 lakh shares) amongst all call options although the highest open interest (59 lakh shares) for the put side, that of November 4600 puts, outweighs the same.
NIFTY’S SUPPORTS
While these events on the options’ side indicate a trading zone for the Nifty, 4800 seems to be the near term resistance which capped its gains on Thursday. This resistance is arrived at by a trendline joining the Nifty’s intermediate highs during June-August 2009. As can be seen from the first chart, besides this resistance, the standing of the Nifty’s 50 DMA near 4900 defines the struggle zone for the Nifty.
0 comments:
Post a Comment