Nifty in a bullish to neutral mode. We went long at 24330

On May 6th, Nifty attempted to exit a consolidation phase with an upward breakout, forming a significant long green candle. Nifty closed at 24,330, exceeding our buy trigger value of 24,227 for that day, as indicated in the spreadsheet below. It also clearly closed above the EBR/EBL band, and the MHAF candle was strongly bullish by the day's end. Consequently, we went long near the market close by establishing a covered call position.

We purchased Nifty May futures at 24430 and simultaneously sold the May 24500 call option for a premium of Rs 325. According to our strategy, this position provides a break-even point at 24105, where we need to decide on our next move, or alternatively, maintain the current position until 80% of the maximum likely profit can be achieved.

However, the market was unable to maintain the momentum it showed on May 6th, and the following two trading sessions were weaker. Nifty rose to 24480 but then began to decline, reaching 24127 on May 8th before closing at 24177. This closing was above our breakeven point of 24105, as mentioned earlier, so no action was taken. If Nifty closes below 24105 today, we will short the future and sell near out-of-the-money puts while keeping the short call position unchanged.

The position currently has an unrealized loss of Rs 23,765, which could break even or turn into a profit if Nifty remains stable or begins to rise gradually. However, this scenario appears unlikely, and we might need to change our stance soon.

Cheers and happy trading.