Nifty’s resilience was evident today as it touched the 24500 mark and staged a sharp rebound. This significant intraday swing, while potentially amplified by today’s options expiry, underscores a notable shift in momentum. Interestingly, on Tuesday, the 24500 level was highlighted as a critical threshold that, if breached, could have paved the way for further declines. However, the index demonstrated robust support at this juncture, propelling a sustained upward trajectory.
This rapid surge is pushing towards an extreme, reminiscent of the sharp rallies we observed around mid-September and early December. History suggests a similar pattern: the index tends to relinquish a significant portion of these dramatic gains in the ensuing trading sessions, though this unwinding typically unfolds over several days. Strategizing in such a volatile environment is far from straightforward, particularly for retail option traders who can find these market phases exceptionally deceptive. For seasoned professionals, however, maintaining a degree of patience often proves crucial in navigating these turbulences and allowing their strategies to realign with the broader market trend. The key lies in resisting impulsive reactions to these sharp moves and trusting in a more measured, longer-term perspective.
Having witnessed today’s emphatic upward thrust, my recommendation to our High Net Worth Individual clientele is to strategically initiate short positions in at-the-money (ATM) or in-the-money (ITM) call options. This tactical maneuver is predicated on the anticipation of a well-deserved technical retracement, which, based on our analysis, is likely to unfold between the latter part of May and the early days of June.
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