Nifty 15,400 CE option sees huge addition of open interest; indicates limited upside!
The bulls continued their magnificent form even on Tuesday with Nifty scaling to a fresh intraday record high of 15,431.75, early during the day.
However, there was a change in the fortune as all of a sudden, selling pressure emerged and Nifty, not only wiped out all of its gains, but also went onto touch its previous day’s low. On the other hand, Nifty managed to recover from the lower levels and finally signed off the day with a modest loss of 1.20 points at 15,313 in the last leg of the trade.
The price action of the day formed a small bear candle with shadows on either side, which resembles a spinning top kind of pattern that reflects indecisive of the market participants at higher levels. Interestingly, the index tested its prior day’s low but did not close below that thereby, indicating buying demand at lower levels and the testimony of this is that the index bounced nearly 70 points from the day’s low.
Further, the index is holding above its significant short-term support of 5-EMA, which make us confident that the index would maintain its positive stance and gradually head towards its earmarked target of 15,550 in the coming days.
However, temporary breather cannot be ruled out and during this breather phase. The level of 15,200 is a crucial support and a decisive move below this level would open gates for a further correction towards the last week’s low of 14,977.
An interesting observation is that if we analyse the first two trading sessions of the week and compare it with the prior week’s first two trading sessions, it rhymes as in both the weeks, we have seen similar nature of candlestick formation. So, who knows whether the remaining part of the week too would resemble the prior week’s performance; only time would tell!
However, on the upside, the level of 15,400-15,550 would continue to act as a strong resistance level for the coming days. And this is quite evident from the fact that the maximum open interest in CE options has shifted lower to 15,400 level. Further, there was huge addition of over 20 lakh open interest seen in 15,400 CE. Additionally, one more thing worth mentioning is the fact that PCR stands at 0.87 as the latter has moved below 1, which means that call writers are building fresh positions and expecting a limited upside.