Nifty trading guide for May 23: Analyst suggest using 'Bull Call Spread'

Nifty trading today: Given the prevailing volatility and the presence of clearly defined support and resistance levels, a 'Bull Call Spread' is an optimal strategy

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

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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.)