NIFTY pullback rally gained strength. May witness more bullish strength.

Yesterday's (2nd Jan) movement in NIFTY confirmed more strength for it in the coming days. Though the index closed 5 points lower but the strong support at lower level indicates the thin volume rally in the holiday week had juice in it. I did not feel it was prudent to hold the bearish outlook for the time being.

The daily SMT chart (blue line) showed a bullish anomaly at the end of 2nd Jan trading day and accordingly the bearish hedge comprising of short NIFTY futures and short 8100 puts were closed. To create a bullish hedge we went long in NIFTY futures at 8190 and shorted Jan 8350 calls (0.38 Delta) in 1:1.6 ratio.

However, things can change again very soon when the FIIs return to the market after the holiday break and we might get fresh bearish signals in a short time.