On Friday, Nifty sold off, after opening near its strong resistance of 4920/4925 and failing to sustain above that zone. Short term trend has been confirmed down now, and breakdown point is 4925 Nifty Spot. As long as Nifty Spot stays below this, Sell on Rallies should be the mantra for Positional traders. Do not try and look for a bottom just now. If at all Nifty has to reverse this downtrend and conquer its 200 DMA again, then it has to first cross 4925-960 and then 5005 level. Option Sellers can also Sell Call Options of 5000 and above strikes, to take advantage of this downmove. On the downside, 4788 was the previous low. The Bulls would desperately hope for Nifty to hold this level. If Nifty closes below this, it would have formed a Lower Low after failing to make a Higher High. This would indicate continuation of the downmove and will accelerate the downmove, as Fresh Shorts starts to enter the system.
The Nifty Option OI Charts are given below:
There was a lot of action o the Option front on Friday. The Bulls added 3 lacs+ OI from 4400 PE to 4800 PE strikes. On the other hand, the Bears added 38 lacs+ Calls from 4800 CE to 5200 CE strikes. The highest OI in Puts as of now is at 4500 PE strike. The highest OI in Call is at 5000 strike. 4900 is the 50:50 level as of now. After Friay's downmove, how the Put writers react if Nifty breaks 4800, will give further clarity on next move for Nifty.
For tomorrow, immediate resistance for Nifty Spot comes around 4840 and then at 4875 level. Staying above 4875, the Bulls will force some covering towards higher levels of 4905 and 4925, where again selling pressure is expected from the Bears. On the downside, support for Nifty Spot comes around 4820 level. Below this, the recent low of 4788 will be in reckoning. A close below 4788 can provide good momentum to this downmove.
4 June - Nifty Spot resistance at 4840-4875-4905-4925. Support at 4820-4785-4750-4730 - www.niftypower.com
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