NIFTY THIS WEEK

As said in the last weeks post that the “nifty is likely to target the confluence area of 4550-4560”, nifty did a low of 4575 odd and that area has now emerged as strong support zone.
For the past 1-2 months the nifty has been moving in a narrow range which is steadily constricting and is about to break out/down but in which direction? Well that the million dollar question!
The upward sloping support trend line now coincides with 4530 which will act as support if 4570 gives way and 4570 by itself is a strong support.
Talking about resistances
1> On 1st September the nifty made a candle with a long upper shadow and closed in green and the important thing about that day was that the volumes on that day was the 5th highest after the post election circuit thus the nifty can face selling pressure around the 4720-4735 mark (high of the upper shadow), and clearing that mark with force will set up nifty for a target of 4790 and then maybe higher.
2> The rising trend line resistance is at 4780 region and since it has held in the recent past it gains more significance as it will represent a breakout mark for the nifty.
3> On the down sides traders should look out for the 4575-4530 mark and if those are broken then we might be heading straight towards the 4430 mark which should be the last bull bastion
NIFTY OI data
1> The 4700 calls have shed OI as the nifty moved up which showed the jitteriness among the call writers and is a short term bullish signal. Meanwhile the call writers seems to have shifted their positions to 4800 calls which suggests that 4800 will act as a strong resistance, even the trend line resistance is in the area along with 61% retracement of the all time high and oct lows.
2> The 4500 and 4600 puts have showed significant increase in OI suggesting strong support in these areas as of now they have more than 44lac of open positions each which is quite large so early in the series.
3> The heavy positions on either side of the nifty suggests that we are in for some more days of range bound action although the range is getting narrower and is shifting upwards.
4> The futures have shown a decrease in OI which indicates that the rise was more due to short covering and also the Fridays candle which was formed has covered up the last two black candles which were small in nature thus confirming the short covering nature of the rise
Personal view is that nifty can make anew high around the 4780 area but wont have enough power just yet to make strong dash and the rise if it comes is most likely to be utilized by the punters to create more short positions. So it may be better to exit from short term bullish positions partially at those levels (if they come ) , while placing a stop loss of either 4530 or 4430 for existing short term long positions.