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Selling to accelerate below the key level of 5400

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The Nifty Futures have fallen by almost 8% to 5550 from 5900 in last 16 sessions and currently hold 13 points premium over spot as per closing on 13th May, 2011.

In the current series, 5400 put has seen a maximum open interest of almost 8 million shares, indicating 5400 to act as immediate support, closing below 5400 can extend the current fall with more acceleration. Whereas, among call options, 5800 call holds maximum open interest of 7.5 million shares, indicating the 5750-5800 zone to act as very strong resistance , going forward.

The PCR for Nifty futures stands at 0.86 levels, hanging near around oversold zone. Traders with short positions need to be cautious, if the Nifty breaks the 5630 level on the upside, since short-covering is expected above this level. This will lead to an extension of the up move towards 5700-5750 levels.

Currently, implied volatility (IV) of Nifty put options appears higher in comparison with call options , which is the result of heavy buying in puts in the past few weeks. The NSE VIX stands at 20.63 giving no signal of stability in the market.

This concludes that, selling pressure will increase if Nifty is not able to hold 5400 on closing basis, and it will invite fresh short positions in the market for the retesting of 5250-5200 zone.

Written by Kunal Bothra

May 16, 2011 at 1:18 pm

Posted in NIFTY

Tagged with ,

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