Market may hold 4400 level

The Nifty could not hold the 4,700 level for the third consecutive day on profit-booking at higher levels. We had indicated that the Nifty might close below the 4,600 level during the week, and the index slipped below this level yesterday to close at 4,580. For the restoration of the bull market, the index has to trade convincingly above the 4,710 level.

Trading in the Nifty futures suggested that the index might not go below the 4,400 level in the near future. Though the Nifty closed at 4,585 yesterday, the average trade took place around the 4,651 level, indicating that the bulls were not willing to sell below 4,600.

According to technical analysts of JM Financials, the Sensex at 16,000 is at 61.8 per cent retracement to the entire downtrend from its January 2008 high and October 2008 low and, hence, understandably the market is facing some supply around this point. On a closing basis, the uptrend should accelerate.

A build-up in the 4700 call option and the 4300 put option was visible. The options traders were seen buying 4,500-4,700 puts on expectations of a fresh correction below the 4,500 level. Trading was also witnessed in the 4,400 put as open interest (OI) in this strike put has almost remained unchanged despite a trading volume of 3.62 million shares. The 50 per cent retracement for the January-October 2008 rally is around the 4,400 level. The support is seen at 4,300-4,400 levels.

The Nifty August futures closed at a discount to the spot and shed an open interest of 727,950 shares compared to an intra-day build-up of 2.42 million shares. This means bulls have unwound some long positions at higher levels.

via Business Standard