Write up of RK
The market closed at 5279 on Friday indicating strong upward mood. However at the current levels there is a high possibility of profit booking which can take the market down to 5200 levels or below. As a caution, 5200 mayor may not kiss on Monday, it may take time.
The reasons are mentioned as below:
1. The next Fibonacci level is 5304. If the upward momentum breaks this level then the next level might be 5350. But due to the significant gap up opening on Friday which left a wide gap between Thursday’s closing and Friday’s opening, the market will try to fill it as quickly as possible. So, if at all there is a gap up opening on Monday it might be wiser to short it .if profit booking takes place
2. However if the bulls outsmart the bears then they can take the market only till 5350 levels as per the trend lines shown above and 5432 as per fib level
3. History also suggests profit booking at this level last 3 times when the market reached to this level with strong volumes it reversed its direction, as indicated in the boxes.
In summary, the need to fill the gap may be the strongest reason for the bears to take it down on Monday.
If the bears take a firm control post 5200, then we may even test 5100 levels as per the Fibonacci levels.
Note on July F&O series
As per the option chain trended on Friday, it is clear that the day started with a gap up with significant rise in Open interest at 5200 and 5300 puts. This suggests 2 things. There is a strong support at 5129 and 5191 levels ( 5200 minus 71, 5300 minus 109) both 71 and 109 being the weighted avg. Price of the option traded.
Coming to the call side, significant unwinding happened at 5100 and 5200 suggesting a clear short covering by the bears and this short covering might take the market to 5311 or 5342 on very bullish trend if at all.
However, due to an increase of OI of almost 18 lacs at 5400 with an avg.price of 49/- we may see a stiff resistance at 5449. This can be considered as mother of all resistances for the current F&O series.
In summary, the range for the current F&O series is 5129 to 5449.