Options Set up for the Week : March W4

Current Nifty spot 14507

Short NIFTY01Apr2021.14200PE  1 lot @34.7

Long  NIFTY01Apr2021.14800PE  1 lot @280.7

Maximum Profit Potential =26,550/-

Maximum Loss Risk = -18,450/-

Breakeven =14555

Capital needed approx.     < 25000/-

Risk reward 1:1.4

Exit if profit >15-25% of capital or Loss > 12000 

Probability of profit = 55%

Reason : nifty could fall some more from current levels or attempt to move  up some more and settle around 14500. Skip trade if large gapup opening. 

Market corrected fairly : Market Analysis : March 30 2021

 

• March month nifty ended with in red after 5 months of higher highs

• Both weekly and monthly momentum still remaining in the rsi bullish zone. Daily momentum dipped and climbed back to sideways in the last trading session

• Daily ADX rising bearishness in very short term and weekly trend direction movement had earlier crossed over to negative zones but with ADX falling not rising,  while monthly trend still indicate it is upwards in the long term.

• Major window gap support and M candlestick pattern neckline was broken on last Thursday with swing low of 14264 but market has not yet closed below this same gap yet  when Friday it managed to climb a bit up indicating the it could still be a support. The FIB 50 support also hold good.

• The 50 day moving average would be major hurdle upwards which means any moves above 14900 coinciding with FIB levels too could be looks at a market continuing upward journey and also if market fails to hold the support and dips below previous swing low of 14264 then it could be extension of correct that could go up to 14000 FIB 61% levels and if that breaks it would no longer be a correction but beginning of crash which is less likely to happen.

• Open interest on futures indicate that index was bullish. on options OI is bearish with highest resistance at 15000 and major put writing is seen at 14000 levels for April 1 short week expiry. The put call ration also show bullishness

• DII's where the buyers while FII didn't do anything on last session there 2 major sell off days last week by them.

• Bank nifty broke major gap support last week and also ended up with a monthly red candle after 5 months of higher highs. Daily momentum just managed to recover from the dips to sideways but with no indication that it will sustain .

• Weekly  at previous support level that could lead to a change in polarity and bounce from there upwards last session made a bounce from FIB 61% support levels above previous high till 50% FIB but still  did not manage to close in green. Any close above 50 DMA and FIB 38% above 34600 would give hope for bullishness.

• Bollinger band are indicating a consolidation may be over with volatility expanding  walking over bands downside.

• Any weakness further could take bank nifty to 29000 levels of previous swing low

• Open interest on futures indicating bullishness while options open interest is bearish with  highest resistance at 34000 while support seen at 32000 levels for next expiry. Put call ratio is not bullish.

• As expected market broke down last week even when having technical support and the bearish view continues but with a probability that a fair correction has taken place and therefore could not further dip beyond 14000 for nifty and 32000 for bank nifty.

Few random useful trading tips

Few random useful trading tips

• Pledge liquid funds as collateral with certain haircut  and use it for option selling and get interest for same and avoid more cash with broker. 

• Always hedge your overnight  positions for reducing risk to a defined loss as well as get the margin advantage.

• Have backup brokers one or two so that you could take counter positions and mitigate  infrastructure outage risk. Also distribute your capital across multiple accounts . Investments in multiple laptops, collocated cloud and multiple Internet connection could save your capital during outages. 

• Always buy hedge positions before taking sell position in order to get margin benefits during execution of trades. 

• Sell covered calls for your liquid, quality investment in stocks and get regular rental income and use selling of cash secured puts to buy stocks on delivery at cheap price while increasing profits same time. 

• Trading is full time business if you want make money consistently  from it and doing it part time won't work. Better to do investing than trading if you are part time. Most of the trading  you believe could be done part time may take away most or all l of your earlier gains  when you miss to be there to adjust or get out on a day when things go wrong like your stop loss failed to work or circuit hit or surgical  strike or corona or nse exchange itself down.Hedging your positions help to certain extend but why do a business where making money consistent  is very very tough when investing is more safer . 

• Do every single  trade with fixed rules and risk reward and position size defined  and set target as small %return of investment on monthly basis with capital protection as key during initial stages before the  heavy lifting.Too much complicated strategies often may not work as they may be curve fitting or just duplicating filters. 

• Forget your expertise, conquer your FOMO and simply sit outside with no trading on major event days  Not trading itself is a trade. Also trade only if u get a full signal on your rules on other days. 

• Trading is an extension of you and the  reason why you are attracted to it  is the freedom you seek for, but without  discipline in your daily  life there can't be one in trading and it takes no time to loose many times more than what you won earlier . Therefore start investing small parallel is the  way to go in long term. 

• Physically being fit, meditation, visualisation are only ways to calm you and help you make good  decisions consistently. 

• What matters is if your profits are bigger than your  smaller losses. So learn how to let profits run and accept happy small losses.do know about expectancy, drawdown etc beforehand .

• Having multiple strategies that fits into different  market cycles  is important since all strategies won't work in all cycles. For for example have neutral positions that gives you money even when markets are sideways, while your momentum directional trades feeds you when market are trending. 

• Backtesting your trading rules either manually or programmatically helps improve your trading confidence in a volatile market and remain disciplined when faced with  drawdowns or other doubts . Automation /algo trading helps better  execution of trades and reduce mindset issues to certain extend but with the risk of bugs  and so it still need monitoring. Also same time forward test and review /journal your trades regularly. 

• You cannot ever duplicate another person's trading same way as the execution, risk management and mindset differs. So trade the way  what fits your personality like whether to  buy option or sell option or cash or options or breakout or support resistance etc etc.. Remember that if trading was only technical most of traders would have been multmblliinares by now which is very far from reality as trading is combination of technicals, psychology and risk management. So never try copy  rules  and expect it to work for you, nor keep switching or hunting for that holy grail strategy from somewhere. 
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More correction coming or is it over ? Market Analysis : March 22 2021

•  Nifty bounced back from a previous window gap support near 14336-14467 levels after a continuous fall for 5 days bleeding near 1000 points

• Apart from the window gap support not yet broken there is momentum support. FIB retracement on last swing is still giving 50% level support in confluence with gap.there is also a trend line support from March 2020 low. In addition the Friday candle pattern is bullish piercing

• Volatility continue to be contracting showing markets are still consolidation mode and is not trending yet

• US yield shot up and market did a heavy fall on last expiry day. FII continue to be in buy mode most of the days when markets were falling last week.

• Daily momentum is at good RSI support level indicating a potential up move again. Weekly and monthly momentums are still intact in bullish zones.

• Weekly positive reverse divergence seen on momentum indicating an up move with possible targets of 15000 if it works out

• Trend daily signal ADX did a cross over on the positive directional movement with good strength. While weekly ADX trend is heading south on weekly and monthly

• The crucial 50 dma was broken last week with the bearish moves in market

• M candlestick pattern  is a threat if breaking support the neckline

• Open interest  for futures has short covering buildup on both indexes. Open interest for options for March monthly expiry shows highest support at 14500 and has bullish indications overall while highest call writing seen at 160000 and 15500 levels

• Put call ratio of 0.98 is also not in bearish levels

• Net advances on last trading day was green

• Bank nifty had more than 3000 point lost just in a week but bounced back on Friday again from the previous window support levels 33305 level and currently has momentum at  support levels. FIB retracement levels of 50% hold good support as well. volatility contraction and consolidation is seen and any breakage of FIB levels at close could mean a very deep cut that could extend to previous swing lows of 297000

• Open interest on bank nifty showing bearishness unlike nifty with most call writing seen at 36000 levels while support levels are at 33000 levels

• Despite the bearish moves last week India VIX did not shot up but actually fall down from 28 levels on 3rd march  to 19.8 level in between which could be taken as fear/greed levels in markets cooled off and so market may be less volatile as compared to earlier weeks.

• If market could conquer the 50 DMA and resistances at 15000 then it may move till previous all time high and if it fails to do so in coming few days the consolidation could continue or any moves below 14350 previous low could mean a dip 14000 for sure.

• Market may still be consolidating for much more time although it may attempt to rise up coming week as indicated from the various technical supports mentioned in beginning but within  the Bollinger standard deviation range only and any failure of same will see 14000 levels tested is my view.. Slightly bearish view overall.

Consolidation Ahead ? : Market Analysis :March 8 2021

• Previous  week was recovery 600 point move up from the February month end dip and then gave back  450 downside last two day thanks to US yield rise for corrections.

• Market seems to be consolidating with Bollinger bands contracting on both indices.

• Momentum rise got rejected on daily two times 

• Nifty may retest the previous swing low of 14500 levels once gain.

• Bank nifty still could not break above a window gap above 35600-35760 and momentum slipped below equilibrium and managed to climb back 

• if it cannot hold 34500 then it could mean major fall till next far away support at 33000 levels

• Only above 15275 will there be another bullishness seen on nifty on a very short term 

• The ADX trend lines are about to cross over the DM to bearishness but with not with strength

• Weekly and month are still comfortably bullish zones for both indices open interest

• Both indices have bearish buildup on future open interest while options also shows the same with major resistance at 15500 while support are seen at 14500 and 14000 levels. 

• So it could be like charts suggested hovering between 15500 and 14500 that we may see unless major event make it worse  either side.

• VIX which has cooled off to22 levels shot up to 25 level again indicating vitality and choppiness to continue. Option premiums are very high due
  
   to volatility and stop loss getting hit for intraday traders could be seen as in last few weeks

• Overall markets may be consolidating before the next up move is my view while it is not clear how long it may consolidate. Neutral strategies in options with defined risk could be a way for position trades in short terms while intraday trades could be made with strict stop losses watching momentum in the direction of trend.

• Coming week being shorter with a holiday could give theta gain more for option writers

• FII selling  continuously last week is worry for bulls .NBFCs joining Banks with IT also joining led to last weeks fall.US Yield and Dollar index strengthening along with current bearish adds up to the worry.
• Metals, Energy ,Reality, Infrastructure and Public sectors are in bullish zones on charts