With the Nifty locked in a tug-of-war, follow-through buying is crucial this week

Nifty showed a strong recovery on the last trading day of the week, a Bullish piercing Candlestick patterns on daily charts. This indicates a possible break in the recent downtrend. However, follow-up buying is necessary to confirm this reversal pattern. The index remains below its 10-day EMA, indicating that buyers are less assertive, with higher levels continuing to act as a selling zone, which has served as strong resistance for the past eleven trading sessions.

Open interest declines

Comparing the index’s performance since the beginning of the week, the Nifty closed the last session with open interest (OI) of 15.61 million shares, down from 15.88 million shares at the beginning of the week (October 11). Index futures are down 0.44% from earlier this week, indicating significant long unwinding and squaring of long positions.

FPI long-short ratio fell

The long-short ratio of foreign portfolio investors (FPIs) fell significantly, with long positions falling to 33.57% on the last trading day of the week, down from 35.86% at the start of the week (11th October) to 79.89%. Beginning of the series ending in October. This suggests that FPIs are net sellers and have intensified their bearish stance.

Key levels for the weekly series

In the weekly range, the 25,000 strike has significant call open interest with 2.10 lakh contracts. On the put side, there is significant open interest with 1.45 lakh contracts at 24,500 strikes. Active trading in 24,900-25,000-call range and 24,700-24,800 put range suggests resistance around 24,900-25,000 and support between 24,700-24,800. An increase in call writing in the 24,900-25,000 zone suggests that sellers are building strong positions at these key psychological levels, while put writers are cautiously adding to positions at lower levels as the index trades at critical times.

Outlook for next week

The index is trading at make-or-break levels. On the daily chart, it shows a reversal candlestick pattern following the recent move head and shoulders A breakout requires sustained buying interest above the 25,000-25,100 zone for further gains, as significant call writing at this level presents a major challenge. A successful breakout above this zone can trigger buyers, leading to short covering and potentially a strong uptrend. Conversely, a drop below 24,690 could allow sellers to regain control, especially as long unwinding continues and FPIs continue to reduce their positions. This will push the index towards 24,500-24,300 levels. FIIs have continued to sell, having offloaded stocks worth around ₹70,000 crore to the cash segment so far. A break in this selling pressure could provide a lift to the index.