NIfty - Possible bounce from 16750-16780 area

27 mar 2023

NIfty in comparison to even US where there is major issue with banking sector has been very bearish. It has taken support from 16850 region where there was a gap and has tested it a couple of times. But the area of 16750-16780 which has provided major resistance and support from where price has moved very violently has still not been tested. IMO this area is going to be tested probably this week and Nifty should get a meaningful bounce upwards from this area.

Reasons for the possible bounce: -

1. Major resistance (supply) and support (demand) area at 16750-16800 which has provided huge moves in the past.
2. Nifty has left this space by not testing it in previous days and has been unusually bearish with no green candles.
3. Extreme short positioning in options and futures by FIIs which could lead to short covering on expiry day.
4. End of the fiscal year and quarterly expiries coming up. Mutual Funds will try to boost NAV to show better returns for their schemes.

I think similar to what we saw in Dec 2022 there was sudden bounce to boost quarterly returns, could repeat this month as well. Plus expiry this week is on Wed which could lead to short covering quite early.

Nifty would likely test this area on Mon and Tue maybe and then bounce on Wed. A good bull put spread at around 16800 should give a decent trade (due to higher IVs which will drop) with SL of 16740.

Any 15 min closing below 16750 should be taken as a sign of further bearishness leading to move towards 16500.

Happy Trading and Best of Luck!!

Disclaimer - This is not trade recommendation or advice. This is purely for educational purposes. Do your own research before entering into a trade.