Despite some seeming provocation with that hit on Qatar US assets, the market seems unfazed and the Gift NF is up in the morning so a nice gap up is on the cards. Iran has made conciliatory moves and Brent dropped sharply to break below $70 levels and this has prompted the rally. The reversal from the highs near 80 looks quite decisive and now we can see Brent head down to the $64-65 levels.

In options we find that 25000/56000 continue to be the big OI strikes and with premium pricing being around normal, we can assume that traders are playing with short straddles for theta gains. It is the last week of June expiry and a premium of 260 for NF (pointing to a range of 24750-25250) and 630 for BNF (pointing to a range of 55450-56600) is what we need to be looking at too. A directional move higher may lead to brisk short covering activity. One may remain long (or create new ones) with stops at yesterday lows of 24825/55800. Of course, this talk of conciliation is yet to be confirmed finally but oil price moves are enough indication that it is in the bag. Since option premium were not high as of yesterday, short covering would occur first

25200, the immediate target is already being seen in pre market trades. Beyond that, short covering and new buying could carry NF toward 25600. For the BNF, the immediate target would be 56650 and beyond that the index can spurt towards 57125.

Relief rally should appear in Indigo. Crossing 5475 should send it towards 5600. The drop in oil prices should provide a fresh tailwind. Ongc and OilIndia would take a hit while rallies will be seen in HPCL BPCL etc. These are obvious oil-based trades. But with a $10 dip in prices, this expectation should probably play out. The usual sector shifts may see profit taking emerge in Defence stocks since they have run a good bit.

With the resistances at 25k/56k getting crossed, we could return to swing trading days again. Let’s see. FIIs are not in a mood to sell but what we now need to see short covering emerge in Nifty index futures.