 "Nifty trading guide for May 23: Analyst suggest using 'Bull Call Spread'")
Nifty strategy:
- Strategy: Nifty Bull Call Spread
- Expiry: 29 MAY 2025
- Strikes: Buy 24,600CE and Sell 24,900CE
- Net Outflow: ~105
- Stop Loss: 50
- Strategy Target: 200
Rationale:
- Markets fell sharply on Thursday, with broad-based selling led by IT, FMCG, and Energy sectors. The recent pullback seen over the past few days is likely due to overstretched technical indicators.
- The main trend remains positive above the key support of 23,935, while the 24,450–24,380 region is a crucial support area. The ongoing correction could offer a buying opportunity within the broader uptrend and move above 24,750 reigniting upward momentum back towards 25,000–25,100.
- Given the prevailing volatility and the presence of clearly defined support and resistance levels, a 'Bull Call Spread' is an optimal strategy.
- It offers limited risk with a favourable reward-to-risk ratio, aligning with expectations of a moderate rebound.
(Disclaimer: This article is by Sahaj Agrawal, senior vice president, head of derivatives research, Kotak Securities. Views expressed are his own.)