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After hitting a bottom at 17,255.2 in the previous week, the benchmark index has delivered a very sharp rally, surprising bears big time. The rally was not purely supported by domestic factors but the same pace of recovery in was the primary reason for Nifty 50’s sharp reaction.
Dow Jones has taken support around a strong demand zone of 32,500 – 32,600 and bounced back over 1,000 points from there in a mere three sessions. As long as this sharp rally in the US is continuing, the Nifty 50 index would also likely haunt bears. However, looking structurally, Nifty 50 is still in a downtrend and the current retracement is providing a good opportunity to exit long positions.
Image Description: Daily chart of Nifty 50 (spot)
Image Source: Investing.com
As of Monday, the Nifty 50 index has exactly recovered 61.8% of the previous fall from the swing high of 18,134.75, marked on 16 February 2023. This 61.8% retracement is a good Fibonacci level and might lead to the continuation of a downtrend from here. However, as the short covering is still going on, waiting for some weakness to initiate short positions would be an ideal way to trade. If the rally surpasses the previous swing high, then Nifty 50 would structurally start its uptrend.
As for the current 9 March 2023 weekly expiry, 17800 CE holds the highest open interest (OI) of 1.63 lakh contracts, making it a strong resistance, as denoted by options data. Coincidently, this was also the high of the previous session and a 61.8% retracement level as well. Hence, there is a high likelihood that Nifty 50 would not expire above 17,800 by the upcoming Thursday. The futures is trading at a good 63 points premium, therefore, 17,900 should be looked upon as the resistance for this expiry.
On the downside, the new support has been revised to 17,250 on the charts, slightly below the previous zone of 17,350. The options chain is showing that 17500 PE has the highest OI of 1.62 lakh contracts which might work as good support for the next two days.
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