In the previous session, NF did a short covering auction. Buyers needed to hold 21410–440 zone (Jan Fut) to get probe higher and below 21330 (Jan Fut) expected two-way choppy moves. NF opened higher around short covering P shape profile value area high (VAH), but buyers failed to take advantage and went for liquidation straight, which probed back the entire value area of the previous session till value area low (VAL), then most session NF did skewed down balance with two-way choppy moves in between.
All the levels mentioned below in the report are from the Nifty February futures contract adjusting to the premium. The Nifty Feb contract is trading at an approx 140-point premium to the Nifty spot.
Long liquidation auction; b shape profile + Selling tail + Poor lows + Inside day today. A long liquidation auction immediately after a short covering profile denotes indecisiveness and lot of inventory shuffle.
Three day composite profile since 23rd Jan is a long liquidation profile as well, and value stands at 21535 (VAH) -21410 (POC) –21320 (VAL).
As per the higher time frame context, 21400–420 is the pivotal zone. Fail to sustain above 21540 or sustain below 21310 will attract back to pivot.
Buyers can take control if they manage to sustain above 21400–420 zone and print daily value above it to mark higher levels 21630 / 21675 / 21740. Tough to sustain above 21675 straight and 21675–740 zone could see rejection down; acceptance above 21675 is for 21810–830 / 21870. Since Jan 23rd, trend-down day sellers have done a poor job on the range extension front. Such poor work from sellers calls for a check at the 21675 zone and then a decision there.
On Jan 17th, Nifty opened a gap down, and 21854–21964 is a gap zone. This 21890–910 zone has a solid resistance and a lot of trapped buyers present there. Not expecting any move above 21910 next week unless some budget day surprises.
Sellers do not have control over the auction as per the structure, and they need to sustain below 21310–360 zone min to get a test of 24th Jan buying tail at 21210–180 and no defence from buyers there means can get new swing lows towards 21120–110 and quite weak below that for 21030 / 20980 / 20910–880. Today’s long liquidation profile printed a poor low with mechanical defense at 21394 and needs repair of such lows before any sustained rally higher.
Overall, heading into the budget week, expecting a probe of 21675 as well as 21330 amid a two-way chop, and then we could see some directional moves.
