Nifty Again Turns Rangebound; What are the New Levels?
NSEI
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NIFVIX
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After falling sharply to a low of 21,710.2 on 20 March 2024, the market recovered to retrace on the higher side. However, as the key support of 21,900 has been breached, the trend still remains to be on the negative side.
This short-term bounce hasn’t been able to materialize into a meaningful rally as profit booking and short selling is exerting pressure from the higher levels. However, a strong downtrend shouldn’t be expected as of now and the market is trading in a more of a sideways trend.
Image Description: Daily chart of Nifty 50 (spot)
Image Source: Investing.com
If in the next trading session, the Nifty 50 does not break the previous session’s high of 22,180, then that would create an up fractal and it can then be marked as a short-term resistance. On the lower side, after 21,900, the new support level that has been formed is 21,700. Earlier this support was 21,600 – 21,550.
Now the new range in which traders can play is 21,700 (support) and 22,200 (resistance). This 500-point range can be played out through mean reversion, meaning selling the rallies and buying the dips.
India VIX is also trading at quite low levels, at 12.7 which is not too high and options premiums would be subdued. Hence, naked options selling might not be suitable in this environment.
Traders can initiate credit spreads against the trend near the support and resistance levels. This means a call credit spread during a rally and a put credit spread during a fall. This would help to fetch better net premiums and as the market is expected to be in a range, the spreads might not be a very high-risk play.
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X (formerly, Twitter) – Aayush Khanna
