The rally from May took a halt this week and the markets turned lower on global cues as fear surfaced about the second wave of COVID pandemic. The Nifty 50 tested the 9900 levels as FIIs remained net sellers this week reversing the trend from previous weeks. The volumes surged towards the end of the week as the price weekend indicating a bearish outlook in the near future.
Open Interest Analysis
The combined open interest in all the three futures increased as the price weakened indicating a build-up of short positions in the Nifty futures.
Option Chain Analysis
When looking at the option chain of the weekly options expiring on the 18th of June, strong short term support levels have developed around 9750, 9500 and 9000 respectively as seen in the high open interest on the put side. While short term resistance points can be observed around 10000 and10500.
FIIs showed net consistent selling this week, supporting the downward move. This is a bearish signal as we head into the next week. The DIIs showed some buying as they got the opportunity to take advantage of lower entry prices, especially on the last day of the week.
For the research methodology and more information on Nifty 50 futures refer to this earlier blog on QuantInsti portal.
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