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Market Overview

In Tuesday’s trading session, the Nifty saw a promising start at around 22,450, riding on the back of positive global cues. However, the day characterized a tight consolidation, closing just below 22,400 with only marginal gains. This follows a rebound where the Nifty has been recovering from last Friday’s gap down opening, managing to claw back about 61.8% from the recent correction. This retracement has become a crucial resistance point for the index.

Technical Analysis and Future Expectations

The 61.8% retracement level, currently acting as immediate resistance, is pivotal for determining the Nifty’s next move. The index’s future direction over the coming sessions will be significant. Foreign Institutional Investors (FIIs) remain bearish, holding approximately 65% of their positions in index futures on the short side, indicating a lack of confidence in a sustained rally. Additionally, the Relative Strength Index (RSI) on both daily and weekly charts shows negative trends, further dampening hopes for reaching new highs.

Given these indicators, it is advisable for traders to consider booking profits on long positions and to reassess their portfolio exposure.

Volatility and Market Sentiments

The India VIX, a measure of market volatility expectation, has dropped sharply by 20%, suggesting a decrease in volatility. This decline may be attributed to easing global geopolitical tensions, recent major index heavyweights’ earnings announcements, and the markets beginning to price in the election results. A lower VIX generally signifies less favorable conditions for options buyers, urging caution among traders planning to take directional positions.

Strategic Trading Levels

The table below outlines key support and resistance levels based on current market data, which traders might find useful for planning their entry and exit points:

Level TypeNiftyAdditional Indices or Notes
Support 122,29073,450; 47,650; 21,200
Support 222,23073,220; 47,400; 21,100
Resistance 122,43073,970; 48,220; 21,440
Resistance 222,50074,200; 48,450; 21,540

Conclusion and Strategy

Given the current market scenario, traders might want to lighten their long positions around the 22,400-22,500 resistance zone. Re-entering the market should be considered either on a breakout above 22,500 or on dips around the identified support levels. It remains crucial to monitor market signals closely and adapt strategies accordingly.

Nifty, Market Analysis, Trading Strategy, Volatility, Technical Analysis, FIIs, India VIX, RSI

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