Direction of markets in near term is still a puzzle, yesterday what I have noticed on monthly chart is total open interest of Nifty future was at lowest level since 2005. Uncertainty that has been in market for long time is responsible for low open interest, low open interest shows that participants don’t find markets attractive in near term hence less participation. Next month i.e May month F&O series will be of uncertain moves, Also if we look at VIX (Volatility index) it is comfortably near 19 level as per yesterdays closing. Look Nifty future monthly chart below:

Nifty Future Analysis for May Series:

 

Another thing which I am unable to digest is, markets had bad news like India downgraded by S&P, VIX is at lowest level since mid July 2011 and also nifty future open interest at low. Nifty future must move higher in may month series targeting 5500 zone if every thing goes fine. Such low open interest may be warning that shifting of trend is undergoing and we may see unexpected moves in nifty future. Q4 results of leading companies will be deciding further direction of markets, I would still add some long positions in nifty future may series around 5160 for positional targets as 5400 and then 5500 with a strict stop loss at 5060 level. This trade is again good example of risk management (Risk reward ratio) as we are risking just 100 points for a gain of 240 points, more than 1:2 risk reward ratio.

Nifty options open interest analysis:

 

From the below open interest chart, it is observed that nifty 5000 put option has maximum open interest, while nifty 5600 call option has highest open interest. Traders must also remember that its too early to analyze nifty options open interest, as open interest has not even crossed 50 lakh mark which is much lower. If you wish to learn technical analysis as I have performed here, just call me on +91-9970777789.

For free updates on nifty future and nifty options, follow us on Twitter, like us on Facebook or subscribe to our Free SMS list.