From 24,000 to 23,500: why the reversal toward 24,000 is still coming

Asia is mixed today. Nikkei is flat. 5%. India is bleeding three sessions deep while US sits on record highs. That's quite disturbing. The decoupling story is now real. Until the crude breaks back below $100 mark or rupee recovers below that 94000, we stay defensive. Now to the part that matters the most. What did the smart money actually do yesterday on Nifty's expiry? Pros, the professional trading desks, they held the futures position at plus 22,977 contracts, almost unchanged from Monday. But here is the move nobody thought about.

Their call short position went from minus 30,000 on Monday to minus 1,84,000 on Tuesday. That is a 1,50,000 more call shorts in one session. Pro just doubled down on the resistance at 23,500 and they did it after the floor at 23,500 had already broken. They also trimmed their long puts hedges from 2,49,000 to 1,86,000. So the hedge has been reduced. They took some profit off the table. The puts had paid yesterday and they have booked the puts as well. Stayed long puts but less defensive than the day before.

Translation, Pro thinks the move from here is more sideways under 23,500. Not a fresh leg down they are expecting. On the other hand, FIIs, the foreign institutional investors, they covered some calls down to minus 2,50,000 from almost 3,00,000. Added 63,000 more long puts, defensive but slowly shifting. And the clients, they added 1,00,000 more long calls. Chasing the falling knife, that is what they are doing. They are still short 7,00,000 puts on the wrong side and that trade can get trapped very easily.

Same trade as yesterday, same losing trade is present today as well. The hierarchy is clear. FIIs are aligned defensive, not exactly short but on a defensive mode. Client is chasing. When this setup runs for three sessions in a row, the bounce that retail is buying eventually comes in but the way retail is positioned, they will never make a catch out of it. Let me give you the levels as well. 23,500 is the new resistance now guys. 3 million contracts of call shorts.

When the market reaches 23,500 sellers show up. Until 23,500 breaks with volume and conviction you do not chase the rallies into it. And 23,800 that's the second resistance, after which we could see a 300 point rally. If 23,500 breaks this is the next resistance or the ceiling to watch for. On the downside, 23,300 to 400 is the mid-range mechanical choppy range where no edge is here. The markets would oscillate between this range so stand down on this range. Do not trade in this range.

23,200 the first support test. If we trade below this with a hedge already in place we are in the buy zone. Remember that. So 23,200 becomes the buy zone for today. 23,500 becomes the sell zone for today, but not without a hedge. 23,000 the deepest support that we saw last week. 6 million contracts. This is where the long-term buyers come back. Now the moving averages. The 20-day moving average just broke yesterday. That is why rallies feel weaker. The 50-day average sits around 23,500 to 600 zone.

The same level where pros are trying to create resistance and selling right now. The 100-day average is around that buying zone of 23,200. That matches the support I just gave you. When the chart and the chain agree, the levels are real. Remember this guys. And the volatility. 26 at close yesterday, up nearly 4% in one single session. 50 mark that I track as a regime gate. 5 today, we move from elevated continuation to a stress level. That matters more for premiums as premiums could spike very easily.

On the sectoral front, every Nifty bucket is showing a sell. So banking, IT, energy, auto, metals, FMCG, all are on the sell mode. Only pharma and chemicals are some sectors which are showing some kind of neutrality. That is broad based weakness, not a stock specific news. 5% down. The rupee at 95 is killing IT margins again. Same playbook as 2022 we are repeating. But the defensive sectors held. 35%. 4%. PSU banks at minus 1%. When the rupee weakens and the crude rises, commodity exporters and metals tends to outperform.

That is what exactly has played out. The bleed is real but this is getting overdone. Three sessions down, FIIs cumulative outflow at 52,000 crores. DII has just absorbed almost 8000 crore of cash buying yesterday. The biggest single session in this May. When domestic institutions are buying this aggressively into foreign selling the floor is being quietly built up even when the chart looks ugly. So my POV stays the same. Buy on dips with the hedges and hedges are not optional guys. Yesterday you saw 23,700 and day before 23,800 put worked for us superbly.

So the dips I want are 23,200 to 300 range. The 100-day average zone and only with the 23,000 put long as your floor. Buy zone exits at 23,500. If the resistance gets broken. If 23,500 doesn't break with conviction we have to sell and runway opens towards that 23,200 to 300 more. If 23,500 breaks with conviction then we have an open door towards 23,800 to 24,000. I expect a sharp reversal back towards 24,000 once the macro lane breaks. The trigger is Brent.

And keep a watch on that also rupee as well. Because rupee once it cracks below 94, 94 we could see either of those flips on the tape. Now RupeeCase Nifty 10 my systematic portfolio. 62. 8 yesterday itself. 7. 86. The metals and energy tilt absorbed the bleed. The defensive setup paid. com. The lesson. You do not need to call it a bottom. You need to size the buys and buy it with hedge. Don't wait for it. Smart money does not chase.

It positions itself for falls as well as some sharp reversals. That was your edge for today guys. If this added value share it with one trader friend who needs it right now. com as well. I'm building RupeeCase, India's first systematic investing terminal. Link is present in the show notes. You just got earlier guys. See you all once again tomorrow on Sensex Expiry.