Nifty caught in tug of war, follow-up buying crucial this week

Skilled exhibited a solid recovery on the last trading day of the week, forming a Bullish Drilling candlestick pattern on daily charts. This suggests a possible pause in the recent downtrend. However, follow-up purchases are needed to confirm this reversal pattern. The index remains below its 10-day EMA, indicating that buyers are less assertive, and higher levels continue to act as a selling zone, serving as a strong endurance during the last eleven trading sessions.

Open interest declines

Comparing the performance of the index since the beginning of the week, Nifty closed the last session with an open interest (OI) of 15.61 million shares, up from 15.88 million shares at the beginning of the week (October 11 ). This represents a 0.44% decline in index futures compared to the beginning of the week, pointing to significant liquidation of long positions and unwinding of long positions.

FPI long-short ratio falls

The Long-Short ratio of foreign portfolio investors (FPI) has fallen noticeably, with long positions reducing to 33.57% on the last trading day of the week, down from 35.86% at the beginning of the week (11 October) and 79.89% at the beginning of the week. the beginning of the October maturity series. This indicates that FPI They are net sellers and have intensified their bearish stance.

Key levels for weekly series

In the weekly series, the 25,000 strike has significant call open interest with 2.10 lakh contracts. On the sales side, the 24,500 strike has substantial open interest with 1.45 lakh contracts. Active trading in the buy range of 24,900-25,000 and the sell range of 24,700-24,800 indicates resistance around 24,900-25,000 and support between 24,700-24,800. Rising calls in the 24,900-25,000 area suggest that sellers are building strong positions at these key psychological levels, while put option writers are cautiously adding positions at lower levels as the index trades at a critical moment.

Outlook for next week

The index is trading at decisive levels. On the daily chart, it has shown a reversal candlestick pattern, following a recent Head and shoulders break down. Sustained buying interest above the 25,000-25,100 area is essential for further gains, as issuing significant calls at these levels presents a significant challenge. A successful break above this zone could shift the momentum towards buyers, leading to short covering and potentially driving a stronger uptrend. On the contrary, a fall below 24,690 could see sellers regain control, especially if the long-term sell-off continues and FPIs persist in reducing their positions. This could push the index towards 24,500-24,300 levels. FIIs have been on a persistent selling spree, offloading nearly Rs 70,000 crore worth of stocks in the cash segment so far. A pause in this selling pressure could boost the index.