Sell on rally Or Buy on dips after the bloodbath week ? Market Analysis :March 1 2021

What a hell of a week it was. Thursday NSE had technical glitch that froze market for hours after which market surged up and then very next day big single day fall of 630 points from previous close when FII sold 8300 crore and volatility index shot up 30%.Following are what charts and technical analysis say about it.

• The Big Red bearish daily candlestick forming a window gap resistance 14919-15065 levels above has now taken support of another window gap below at 14467/14336 levels.

• Lower Low Lower High price action on daily charts which says it could be sell on rally market probably.

• The next pivot point support level would be 13600 levels previous swing low

• From the last swing FIB retracement has taken support on 50% confluence with gap support and 50 day moving average support too.

• From a medium/long term point of view, It still is only at 23% FIB retracement level even if it falls another 1000 points if we look it from  March-2020 corona Dip.

• Momentum was rejected at 60 resistance and trending downwards bearish while the Trend is clear bearishness on directional movement but again not gained enough strength or rising

• On the Upper side can be bullish again if it closes above the window gap resistance above 15000 after which it could move till 15500 levels easy.

• 41% change in open interest building on bearish side happened on nifty other day which is heavy bearish ness ahead indication.

• For the next expiry huge option writing seen at 15000 level again indicating bearishness further while support are see at 14000 levels only

• India VIX is rocking high level of 28 plus even at this all time high markets is not good thing as it indices market can be heavily volatile coming day similar patter since last many days..

• Historic volatility is currently below current IV which says probably time to go short nifty may hover around gap support for a while and then bounce back while bank nifty may seek 20 moving average support before coming up.

• For positional swing trades i would like to sell far OTM monthly call options of course hedged in such volatile market. For intraday trades it is clear shorts when momentum and price action gives the signals on lower timeframes

• bank nifty has great support at 31850 levels  if it dips that 2000 points next week confluence with 20 moving average support

• momentum and trend is bearish for bank nifty but trend cross over awaiting to happen next week on directional movement

• heavy option resistance seen at 36000/37000 levels for next expiry while some supports seen at 33000/34000 levels  confluent with a window gap there on charts..

• 15% OI change in open interest previous day bearish enough for bank nifty

Trend correction or reversal ? : Market Analysis - Feb 22 2021

Trend correction or reversal ?

1. 4 red candle in a row and a weekly candle seen red
2. Momentum divergences seen last week played out well dragging nifty to their target levels now
3. Momentum on daily broken bullish zones but weekly and monthly momentum still intact in bullish zone
4. Price took support on  20 day moving average line
5. Took support of 14977 level candlestick price support level after earlier breaking previous support of 15250
6. Price took support on previous swing pitch fork middle channel
7. ADX DM+ trend continue to be in bullish while heading towards a cross over with strength seen weakened.
8. A positive reverse divergence on momentum may be forming but with a slight dilution after  breaking bullish equilibrium, but a bounce from current levels cannot be ruled out if that works out targeting previous high 400 points up.
9. Next support levels would be 14750 levels based on previous candles where it could bounce with change in polarity
10. This is also the FIB 38% retracement level from last swing which is confluence of support indicating market could dip some more before reversing..
11. As per FIB extension if previous high is conquered back market could move till 160000 levels.
12. 15 min charts of previous one week showed a clear downtrend with selling seen every time it hit simple moving average
13. line and if price stays above 15250 levels there could be bullishness back again while and breaking of 14750 level are not correction any longer instead would be a reversal
14. Open interest data showing nifty as long unwinding which mean price is decreasing at the same time open interest is falling
15. Feb expiry options open interest is bearish with call writing at 15200 to 16000 levels and major support
16. levels seen only at 14500/14000 levels while current 15000 level has good OI support
17. for now again indicating market could hover around it some more that need to be watched if it gets broken on Monday. Put call ratio fallen to bearish zones of 0.87 now.
18. DII sold 10 time more than FII the little bought last day and same was happening entire last week
19. VIX rose more than 3% in a single day after having cooled off previous few days and volatility continues to be there in market as long as it is above 20 levels
20. Bank nifty has active positive reverse divergence on momentum seen with bullish momentum still in bullish zones and there could be a bounce up with a change in polarity move if it plays out.
21. it has currently taken FIB 23% support  and below supports levels could be moving average support at 35000 levels and fib 38% at 34650 levels.
22. ADX for bank nifty  has taken a bend after the recent trend dip but still directional movement still positive.
23. RSI momentum is intact in weekly and monthly timeframes
24. Bank nifty is showing clear bearishness on open interest with price falling and oi increasing.
25. Options OI is also bearish with call writing heavy on 37000 levels and supports writing seen at 35500-35000 levels
26. Sector wise private banks were performing worse last day while all other sector were neither too bullish or bearish..

Correction due on expiry : Market Analysis: Feb 18 2021

       correction on expiry?

• Previous support level of 15250 broken multiple time last day
• Bearish momentum divergence seen on daily charts that could drag market to 15000 levels
• FIB retracement of last swing and window gap support is confluence with above levels
• Last candle on pitchfork channel support any fall from it is beginning of bearish move for short term
• All timeframe momentum continue to be in bullish zone
• Adx dm+ heading towards a cross over probably and less strength in trend
• open interest for expiry shows bearishness with highest writing see on 15300 levels and support level writing at 15000.DII sold more than FII bought for 2nd day
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Simple candlestick patterns/ trend-lines work well on smaller intraday timelines too.Check yourself in the chart how a W ,rectangle pattern and trend-lines.

Nifty on top for a breakout which side?

• 5 days of consolidation and Nifty closed each time on top of a previous window gap support with two of them including the last days candlestick being doji indicating uncertainty in market. 

• Fib extension 78% seem to be major resistance and was attempted for breaching twice 15250 levels and any up move is only once market crosses above it. and resistance beyond that  could be at 15400 to 15750 based on FIB extension and Pitch fork analysis from last swing. 

• Apart from the 15000 Big rounding number and previous gap support the 23% FIB and previous support remain same as last week at 14750/14850 levels

• Candlestick pattern shows a flag breakout 

• Momentum still at bullish zone on all timeframes daily weekly and monthly. A potential 4 candle weekly bearish divergence didn't playout when last week closed above previous candle high

• The trend indicated by ADX/DM+/- is bullish on all timeframes but strength is not great and is not rising up.

• Open interest - nifty futures is showing short buildup on open interest .15500 is having highest call writing which is less than the 15000 highest put writing and with pcr fallen 12%from last value and so overall gives somewhat bearish indications. Monthly expiry has highest put writing at 13950 followed by 14450/14950 while highest calls are seen at 15500 and 16000 levels and overall not bearish.

• 4.25% fall to 22 levels for VIX market cooled off a bit compared to earlier many days of volatility

• Sector wise private banks was doing good last day while FMCG went down most

• FII buying seems to gone negative after 9 days of continuous buying which does not seems to be good

HOW DO YOU FIND THE RANGE OF NIFTY MONTHLY INDEX MOVEMENT FOR OPTIONS TRADING ?

 Following are different ways of finding the range of nifty monthly index movement for option trading and a combination of all methods together to reach to a conclusion works.

• VIX Volatility method (spot price * (vix + 100)) * square root (number days to expiry +( 365- number of holidays))

• AverageTrue Range method ATR indicator value on your monthly technical chart of the index

• Chart Support/Resistance method Use any of the methods for finding support and resistance from technical chart on the index like trendiness /pivots/price action etc

• Open Interest method . Find which strike prices where the maximum put and call writing for the index options for the monthly expiry
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Market Analysis BANKNIFTY FEB 10 2021 : Doji dancing

• 3 doji candlestick patterns dancing on bank nifty charts indicating indecision after an all time rally of 6600 point post budget

• Probability of Bank nifty taking gap support 35400/35500 levels and bounce back to complete the 1 hour M pattern

• Daily chart FIB retracement to bring 35000 levels but only if the gap support above is breached

• Upper side 37300 can be reached if it breaches the previous all time high 36600 levels

• Volatility expansion on daily and still waling on the bands of Bollinger 

• Huge volumes of trade even today also 

• ADX not rising and trend strength is not great though in bullish zones

• Unlike nifty bank nifty open interest is long buildup. Again Unlike nifty bank nifty Both 36000 and 37000 sees heavy call writing indicating resistance to climb up there while 35000 has highest open interest indicating bullishness overall for current expiry. PCR is also in bullish range

Market Analysis NIFTY FEB 10 2021 : Consolidation after a Rally?

•  Nifty hit the FIB extension target of 15250 ,made all time high and the reversed with heavy sell off in last one hour closing with a red small body candle closing below previous day low The pitch for top channel was hit as well.
• Gap support exist at 15015-40 levels 
• The fib retracement of last two swings a 23% support at 14850 and 14750 levels
• The upside targets could be another hit on last  pitchfork top 15300 and if that is broken coming days could rally towards 15770.
• Nifty futures data shows it is "long unwinding" where both OI and price decrease is seen which could be a slight bearish indication.
• Open interest for options data for upcoming weekly expiry has resistances seen highest resistance at 15500 and support at 15000 and PCR is bullish level of 1.11.monthly expiry large put writing seen at 14000K which may be worst fall expected while upside call writing seen at 16000 levels too..(can u believe it)
• VIX moved up more than 4% in last 3 days indicating greed fear that  could lead to volatile moves like today any time during day. IVP is 50% times fallen below during last one year current IV and is still below Historic iv  levels which may be still in favor of option buying
• FII buying continue and selling was more by DII's today.

 

How to identify on previous day that next day is a gap up/down?

Well !! this is a million dollar question but most traders do often seek the answer for this and the following notes are my thoughts on same

• A gap up/down typically means heavy bullishness/bearishness during opening of market that could be a continuation of the previous days trend or it could also be some overnight events that market gets excited upon. The second reason is outside our control and need be handled based on your judgment of situation at hand and your view on market knowing or without knowing about it.

• Gap-ups/down benefits you differently depending on whether you are intraday player or carrying forward a short swing trade or a positional trader.

• Make note that a gap-up/down does not mean just doing a trading for the day but they are supports/resistance for future days too.

• For intraday traders gap-ups/Down most times give very less opportunity as trending most times end after a gap-up/down and it remains sideways giving less opportunity for directional trades.

• Gap-ups could be "break away" getting outside of a consolidation phase or a "continuation" gap u could hold on or it could be "exhaustion gap" that could trap you or tells you to short a gap-up.

• As technical analyst we could try get clues on possible gap-up/down using a combination of the price, volumes, momentum, trend, volatility and then optimize our trading rules around it.

• Does the previous day lower timeframe candlestick patterns show bullishness/bearishness ?
• Does the previous day trendlines show any immediate resistances/support breaches?
• Do they show any breakout /consolidation patterns like flag/triangle/rectangle or a change in polarity?
• Is the momentum taking support or reverted or resisting or breaching the key levels?
• Do we have any divergences on momentum? How strong are they?
• Do u see any crossover of ADX? do u have it rising up/down? Do we have a ADX indicator bend seen?
• How good is the volumes traded previous day especially during second half? is it above 20 simple moving average?
• Do we have a volatility squeeze for a potential breakout?
• where are the highest open interest writing and supports? How close/far are last traded price from those?
• What was futures open interest buildup indicting? is it long-unwinding or short covering or long/short? Markets may have reversed end of previous day and there could be panic short covering/longunwinding moves?
• Monitor VIX and see if it has been rising or falling previous days or hours? when the VIX is rising most times it brings the market down.
• FII buying and selling spree can give clues as to if they are likely to continue do same or not?
• SGX opening green could bring positive or negative moves here too
• US/Europe markets performance also indices could being positive or negative moves here too
• Dollar/Euro /Crude Index movements overnight has impact on our market next day?

• As briefed earlier identifying gaps before hand is not just enough, knowing how to play the gaps is what matters. We could be doing both directional or non directional trades even with gap-up/downs as well. Having a trading plan as per your previous day view is what is important. Markets are random and our analysis may not work at times and what really matters is what is your plan B? and not just your plan A.