Post Market Review Feb 29, and Pre-Open Market Analysis Report - March 1, 2024

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Current Market Overview:

The market is anticipated to remain rangebound, with experts suggesting that as long as it trades below 22,200, the possibility of another upward move in the Nifty 50 is limited. Immediate support is identified at the 21,950 level, coinciding with the 21-day Exponential Moving Average (EMA), followed by 21,850 along an upward-sloping support trendline. The index successfully defended these supports, signaling a positive outlook.

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Recent Performance:

On February 29, the BSE Sensex gained 195 points, closing at 72,500, while the Nifty 50 closed down 32 points at 21,983. The indices exhibited volatility, forming a bullish candlestick pattern resembling a High Wave on the daily charts, indicating increased market volatility.

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Technical Analysis:

Technical analysts note that the index concluded just above the 21-day EMA and stress the importance of maintaining a position above 21,950 for potential recovery. A decline below this level could lead to a further drop towards 21,800. The immediate hurdle zone from a short-term perspective is identified between 22,230 and 22,250.

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Broader Market Performance:

The broader markets outperformed, with the Nifty Midcap 100 and Smallcap 100 indices gaining 0.5 percent and 0.6 percent, respectively.

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Options Data and Key Levels:

Analysis of Pre-Open Market Data - March 1, 2024:

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Call Open Interest (OI):

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·??????? The highest Call OI is at the 22,200 strike with 1.6 crore contracts, indicating a significant resistance level.

·??????? Meaningful Call writing is observed at the 22,000 strike with 57.93 lakh contracts, reinforcing the resistance at this level.

·??????? Maximum Call unwinding is seen at the 22,200 and 23,000 strikes, shedding 69.59 lakh and 66.46 lakh contracts, respectively.

Put Open Interest (OI):

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·??????? The highest Put OI is at the 22,000 strike with 99.46 lakh contracts, suggesting a crucial support level.

·??????? Meaningful Put writing is observed at the 22,000, 21,900, and 21,400 strikes, with 46.49 lakh, 36.44 lakh, and 7.41 lakh contracts, respectively.

·??????? Maximum Put unwinding is seen at the 21,500 strike, shedding 23.35 lakh contracts.

Interpretation and Recommendations:

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Crucial Levels:

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·??????? The 22,000 level is crucial as it has both the maximum Call and Put OI. A breach above 22,000 could signal bullish momentum, while a breakdown below could indicate a bearish trend.

·??????? Call writing at 22,000 suggests potential resistance, and Put writing at the same level indicates strong support.

Resistance and Support:

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·??????? Resistance is expected at 22,000, 22,100, and 22,200 levels based on the Call OI and writing.

·??????? Support is seen at 22,000 and 21,900 levels based on significant Put OI and writing.

Volatility Expectation:

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·??????? The substantial unwinding of Call contracts at 22,200 and 23,000 strikes suggests a possible reduction in volatility.

Trade Recommendation:

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·??????? Traders may consider a bullish stance if the Nifty 50 sustains above 22,000, targeting resistance levels at 22,100 and 22,200.

·??????? Conversely, a bearish stance could be considered if the index breaks below 21,900, with potential targets at 21,800 and 21,500.

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Risk Management:

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·??????? Given the volatility, traders should implement proper risk management strategies, including stop-loss orders and position sizing.

Put Call Ratio (PCR):

The Nifty PCR jumped sharply to 1.09 on February 29, indicating a bearish trend as Put options trading volume surpassed that of Call options.

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Institutional Activities:

Foreign institutional investors (FIIs) net bought shares worth Rs 3,568.11 crore, while domestic institutional investors (DIIs) sold Rs 230.21 crore worth of stocks on February 29, as per provisional data from the NSE.

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Possible Trade for March 1, 2024:

Considering the rangebound market and the technical levels mentioned, traders may consider monitoring the index's behavior around the crucial levels of 21,950 and 22,000. A sustained move above 22,000 might provide bullish momentum, while a breach below 21,950 could signal a potential bearish trend. Traders are advised to exercise caution and adapt their strategies based on evolving market conditions.

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Disclaimer:

This report is for informational purposes only and should not be considered as financial advice. Trading in the financial markets involves risk, and individuals should conduct their own research or consult with a financial advisor before making any trading decisions. The author and any entities associated with this report are not responsible for any losses incurred based on the information provided.