If the index drops below 10,275 (the lows of February 19), it will probably test the 200-Day Moving Average (200-DMA), which is at 10,075-10,125. The 200-DMA would be the last reliable support for the bull market.
The Index has bounced twice from 9,675, since December 2016. If the 200-DMA breaks, the 9,675-9,700 region would be the next support. On the rebound, the index has been unable to break resistance at 10,600, a move above that could see a test of 10,900 or even 11,000.
The downtrend post-Budget, has been quite strong. It was also very broad since all three investor-segments sold. Corporate earnings in Q3 have been decent enough. The signals out of the bond market remain negative with G-sec yields rising.
Sentiment has been badly affected in banking and financials. The Nifty Bank slid from 27,200 on the Budget day to hit post-Budget lows of 24,825. It then recovered to 25,700 and crashed again, to recent lows of 24,680. It is now at 24,800.
A strangle of long March 28, 26,000c (82), long 23,600p (125), could be offset with a short strangle of March 15, 26,000c (22), short March 15, 23,500p (38). This creates a position with a net outlay of 137 and breakevens at roughly 23,470, 26,140. This is a slightly asymmetric calendar spread. Either 26,000 or 23,500 could be hit in four trending sessions.
The previous broad bull market uptrend started in September 2017, from support at 9,675-9,700. In the longer-term, the Nifty moved North in December 2016, from 7,900 levels to a high of 10,550, hitting that twice in December 2017, before moving to the all-time high of 11,170.
The Nifty closed at 10,360 on Monday. This close to the settlement, the put-call ratios are not very meaningful. Poor breadth and the sell off on Monday suggest that the index could travel down. But we'll have to wait for a close below 10,200, or above 10,650 to call the trend.
Look at positions roughly 150 points from the money. A bull spread of long March 10,500c (80), short 10,600c (47) costs 33, pays a maximum 67 and it's about 140 points from the money. A bearspread of long March 10,200p (87), short 10,100p (63) costs 24, pays a maximum of 76. This is about 160 points from the money. The combined positions would cost 57, with breakevens at 10,557, 10,143. One or the other side, is guaranteed to be hit on a breakout.