Nifty made a top and registered a
low close to 5040 and it is evident that a tight trading range is in the
process. It would be a tough time for futures traders as it is a range bound
market. We could see heavy premiums in options ahead of the major events next
week and it is better not to be an option buyer as the premiums would reduce
substantially after the major events. As said in the previous posts we could
see nifty making a top and heading lower and if it immediately goes back to
5100+ zone there would be a possibility for nifty making a bearish island at
these levels. Thus 4950-5000 is a decent support zone where some buying can
happen and volatility data suggests some additional short build up at 5100 +
zone. Nifty spent 3-4 days in that zone and it gave enough time for the
distribution activity and there is no case to believe traders would accumulate
nifty in a single day. Thus it would be interpreted as a range bound market
waiting for the news flow in the coming week. If you are a trader in equity it
is better to reduce the high beta ones and try to be on the long side with
those stocks which are not positively correlated with nifty, like techmahindra
and sesa goa. These stocks are holding well to their support zones and would
try for a rebound. Turnover data is also showing that it is a low turnover day
that did not result in much selling activity. The trading range can be 5020 –
5110.
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