Category Archives: Market Setup

Trade Setup/Market Setup

Visit this column every morning on weekdays to know how Indian markets will fare and read the predictions on market behavior. Nifty, Sensex and Bank Nifty and many more important news will be discussed in a short 200-300 word post. Predictions are all based on my own learning and perceptions. The information posted should not be used by others for wrong reasons.

Happy Investing!

#SriramSpeaks

Market Trade Setup 10th December #NIFTY

Market Trade Setup 10th December

Firstly today Nifty is going to open on a big gap down and the entire blame of it need not be taken by the exit polls. Friday was a horrible day for the US market where Dow Jones lost more than 550 points on the fears of global slow down is being a reality now. NASDAQ is even-more worst as it lost more than 3% and the Brent Crude has risen by over 5% and quickly it moved from 59 dollars to 62 plus dollars on the back of a cut in oil production and a drop in US weekly inventories. Asia is also in deep red today morning with all the markets down by more than 1%. Hong Kong and Japan are close to 500 points down. 

Coming to domestics, we have many problems to deal with. First is the fiscal deficit which comes at 2.9% of GDP up to Q2 of this financial year. It is a very bad sign as spending is very high and the Govt is unable to control it. Brent Crude going up more than 3 dollars will put pressure on some of the oil marketing companies but the news we can’t ignore is the Exit poll results. There were 9 exit polls which were conducted for 3 states of Rajasthan, MP and Chhattisgarh. For Rajasthan, 8 out of 9 exit polls say Congress is going to win and 1 exit poll predicts a slender win for BJP. In MP 5 exit polls predict win for Congress and 4 exit polls predicted win for BJP. In Chattisgarh 4 exit polls predicted a win for Congress and 5 predicts a win for BJP. So, not a good news for the markets. 

On the derivatives front, the last one hour of trade saw some bullish positions coming onto the market. Though the Nifty futures positions remained stagnant with longs and shorts almost in equal, the options market saw Nifty put-call ratio going up from 1.44 to 1.47 levels. 10500 put added 4.9 lakh positions, 10600 put added 4.6 lakh positions and 10000 put added 4 lakh positions and 10000 put now has the maximum open interest at 41.9 lakh positions. On the call side 11200 call added 5.1 lakh positions and 11100 call added 3 lakh positions and 11000 call though has shed open interest, it Chhattisgarh the highest in open interest. All this will change today if nifty opens big gap down.

What is the Nifty call for the day?

Global slowdown fears, increased Crude prices, worsening fiscal deficit and exit polls throwing up possible losses to BJP will mean we will have a huge gap down of more than 120 odd points and we might open around 10550 zone and that means we will be back to protecting 10500 again. On the downside 10480-10500 will offer support and a rally in the late day might take Nifty past 10600 mark. So, I suggest going long on this fall around 10520-10550 levels with 10620 as the target

Market Setup 7th December #NIFTY

Market Setup 7th December

The Weekend is here for the first week of December and what a forgettable week this has been! Dow Jones has fallen another 800 points and from there it recovered to close just 80 points in red. That 700 points plus recovery on US markets has sent a positive global signal. Fed’s statement that it will wait and watch before going in for rate hikes has pushed the sentiment. Asian markets have recovered and have come to the positive territory wit Hong Kong, Japan, Korea and China in mild green. The Dollar also has weakened a bit and Brent Crude also has fallen below 60 dollars again and now trading at 59.1 dollars per barrel. 

Coming to domestics, today is the day of elections in two crucial states of Rajasthan and Telangana. BJP started as a big loser in Rajasthan and 3 months ago everyone was talking 130 plus seats for Congress and from there, things have dramatically changed. Rajasthan today has become as unpredictable as Madhya Pradesh and Chhattisgarh. Telangana also has from a position of a cake walk to KCR has turned itself into a heated battle between KCR and Mahakootami. The market will get the feel of the sentiment by 2 PM today and we can see it getting reflected. Added to this is the exit poll results which will come today after market hours and that will lift some suspense from the results. 

Coming to derivatives, yesterday also saw huge selling in the Futures market and the overall long positions in Nifty futures has come down to 56% from 57% and this is the lowest in the series. On the options front, the Nifty put-call ratio plunged to 1.44 from 1.63 seen at the beginning of the day. Lots of put positions taken on the long side were unwound and a lot of short positions in the calls was also taken. 11000 call has added 13.1 lakh positions, 10700call added 9.9 lakh positions and 10900 call added 4.8 lakh positions. On the put side, 10500 put saw 5 lakh positions taken out. 10900 put saw 3.9 lakh positions taken out. 10000 on put side and 11000 on call side still continue to have highest open interest. 10200 and 10500 puts are close and might add some open interest today. 

What is the Nifty call for the day?

Finally the fall seems to have come to an end. We did nothing but watching it. One has to understand that stock trading is all about waiting patiently when unforeseen things happen, try to come out of it without panic. Global growth scare came from nowhere and took away 300 points from Nifty. Today we will recover some of it if other things go fine. Today Nifty will open gap up between 10660-10690 levels and 10750 is very much a possibility today on an intraday basis. If the sentiment in Rajasthan goes fine we can even see a close at 10750 levels. So, the losses that you made will be cut down drastically today. Hope for the best and wait for the next week when the actual results will be out!

Market Trade Setup 6th December #NIFTY

Market Setup 6th December

Fear has no bounds! It can come at a time when everything is alright and take away everything that is alright! We were seeing a handsome recovery and US was showing a lot of signs of growth with GDP coming higher in last few quarters and the Fed made lot of positive statements. Just 2 months ago everything in US was looking bright with jobs data at its highest in a decade and the unemployment at its lowest. Suddenly, fear of whether this growth will sustain or not grips and takes away everything that has grown till now. Global fears are still ruling the markets across the world. US markets were shut yesterday in respect of George W Bush but Dow Futures which are trading in other markets are giving negative cues. Even now Dow futures are down 300 points. Result is every Asian market is in deep red.

Domestically, we are going to vote tomorrow and the campaigning in all 5 states is finally over. The last phase of polls and Exit polls will come tomorrow after market hours. But what is important today is the OPEC meeting today where there is an expectation of supply cut. Will it result in Crude prices going up needs to be seen. There is a global growth scare that means lesser demand to crude so supply cut might not impact that much. Yesterday was the monetary policy day and the policy is more or less on expected lines, including the SLR cut. As I predicted SLR is cut by 150 bases points in multiple quarters by 25 bases points starting from January 2019. So, monetary policy failed to make any impact on the market that is gripped by global growth scare.

On the derivatives front, there was a massive selling that happened in Futures market especially by FIIs who sold more than 1100 Cr in the derivatives market. The overall long positions in the Nifty Futures market has come down from 51% yesterday morning to 49% by the end of the day. In the options market the Nifty put call ratio dropped as there was a lot of demand for the calls and Nifty put call ratio dropped to 1.63 from 1.69 seen at the beginning of the day. Open interest got added at maximum at 11100 call to the tune of 2.5 lakh positions and 11200 call added 2.4 lakh positions and 11300 call added 1.1 lakh positions. Still 11000 call has the maximum open interest but on the put side is still at 10000 put followed by 10500 put. Smart money is preparing for a BJP victory as well as defeat in all the 3 states where it is in direct competition with Congress. 

What is the Nifty call for the day?

Things are not at all looking good for the market and today we will open close to 10700 mark and that will take us below the 200 day moving average and if we quickly dont recover to 10750 levels then we might actually go into temporary bear zone unless the exit polls tomorrow show a decisive victory for BJP. You already have a position at 10820-10840 levels and that will be in deep losses. Hold on to it for sometime as we have every chance of recovery. There are days when you have to sit tight and today is one such day. Stay out of the market and see where this growth scare will take Nifty to. No trade for today.

Market Trade Setup 4th December #NIFTY

Market Setup 4th December

If you have not taken any long position on Nifty, as it went below 10880 levels, you would have been saved from going into red again. You could have gone short yesterday at open but that is for bears and usually, I don’t give such advice. Nifty ended almost at the same point it ended on Friday so you are at the same place where you were last week. US markets continued its rally as Dow gained another 300 points but today all the Asian markets are in red. Hong Kong is down nearly 100 points and Japan id down more than 150 points and after a big rally yesterday today its a technical profit taking that is playing out in Asia.

Coming to Domestics, today is the day where we will react to global factors and technicals, waiting for the fundamental events starting from tomorrow. RBI credit policy is something that everyone will look for but for today, it’s the technicals and Crude what will move the market. Crude is exactly where it was yesterday at 62.3 dollars and we have seen how rupee depreciated and crossed 70 mark again on the back of Crude rising again. Today, the Dollar index has stabilized a bit so Rupee would also like to strengthen today and bond yields will also remain flat as the big policy decision is awaited tomorrow. 

On the derivatives front, there was a neutral action in the Futures market where the equal number of long and short positions that were taken. Due to this, the long positions remained constant at 52% but the Nifty futures premium grew from 20 points to 40 points at the end of the day which is a positive sign in the coming days. On the options front, the Nifty put-call ratio remained almost flat at 1.68 compared to 1.69 at the beginning of the day. There was a bit of call shorting and 3 calls were shorted for every 2 short puts. 11000 put added maximum open interest of 2.5 lakh contracts and 10500 put added 3.1 lakh contracts. This is bit strange and the only reason that explains this is some people are assuming a BJP victory in all the 3 states which can take Nifty past 11000 and expire above that. 

What is the Nifty call for the day?

Expect the Nifty to open at 10850-10880 levels and that is a support zone. If it is taken out then 10800-10820 might come as another support zone. On the upside, 10920-10940 is the resistance and only if it is taken out then the Nifty will move upwards. If you have listened to my advice you would not be holding a long as Nifty went below 10880 yesterday to 10840 levels. Today, I suggest you to go for long if Nifty finds support either at 10850 or at 10820 with 50 points as the target. This target can be achieved either today or tomorrow.

Market Trade Setup 3rd December #Nifty

Market Setup 3rd December

The last month of the year kick starts in a mixed way. There is a huge cheer in the global markets as the outcome of G20 summit is heartening for many. The US and China have met and have discussed trade and have announced a truce for 90 days on any further increase in trade tariffs. so, the whole world cheered up for the result and Dow Jones anticipating that has ended 200 points in the green. Today morning the Asian markets are in green with all of them up more than 1%. Infact China is up almost 3% and Hong Kong is up more than 700 points, China is up nearly 350 points. The only negative is increase in Brent crude prices which went up from 58.8 dollars to 62.1 dollars. This is also on the trade tensions reducing between US and China.

On the domestic front, the GDP number comes at 7.1% vs my forecast of 7.2-7.4% and the market expectations of 7.4%. This is a disappointment for sure as the services sector growth has got stuck. Now we are worried about the growth for Q3 where the situations looks almost same as Q2. The auto sales numbers that came on Saturday has confirmed that. There was a 20% fall in the heavy commercial vehicle sales and even the passenger and 2 wheeler segment has seen a fall. All of them had a negative growth. Added to this is the November month GST collections that comes at 97,000 Crore vs the October GST collections of 1 lakh crore. So, this dip in GST collections is also not a good sign. There are some important cues to watch this week. RBI monetary policy is out on 5th, OPEC will meet to discuss crude production on 6th and we have Exit poll results coming on 7th. So these are some domestic cues we can look at this week.

On the derivatives front, there has been some positive to mixed action in Futures and options market on Friday. The Nifty futures long positions which were at 51% in the morning went up to 52% by the end of the day. There were some longs taken after the market corrected. On the options market however the sentiment was bit bearish with Nifty put call ratio falling to 1.69 from 1.74. There was bearishness both on the long and as well as short side. 2 long puts were taken for every long call and 3 short calls were taken for every 2 short puts. 10000 put added a huge open interest of 6.5 lakh after 10700 put that added 6.7 lakh positions. 10000 put now has overtaken 10500 put for the maximum open interest. On the call side 11000 call has the maximum open interest and it added 1.7 lakh positions. 

What is the Nifty call for the day?

Asia is on fire today and that means we will open gap up above 10900 level, probably at 10910-10930 levels and there it will encounter a resistance which is at 10930-10960 zone. So, there is a chance that Nifty will correct from there and might find support at 10850-10880 zone. If 10850 doesn’t hold then it is a bad news and if 10880 level holds then I would suggest you to go long at 10880 level with 10930-10950 as the target for the next 2 days. We are at a congestion zone and getting upside is not that easy. So, our targets should be realistic giving some time for them to be met.

Market Trade Setup 30th November #NIFTY

Market Trade Setup 30th November

December series has finally started and we have started on a fantastic note which pushed Nifty up 743 points making it the best series in 32 months!!! Though on the last day my call ended on a losing note am not complaining as we have made a lot of money and Nifty also went up. Winning and losing is a part of the game but its the trend that matters most. December is starting with G 20 summit, where Trump and Xi-Ping are meeting and this US-China trade talks will be the big focus. Everyone is eagerly waiting for this and our PM, Modi is also there and likely to hold talks with the US and Chinese presidents. The US closed flat on this news and today Asia is also trading mixed to flat anticipating which way the trade talks go in G-20 meeting in Argentina. 

On the domestic note, today is also the day when the GDP figures for the Q2 will be out. Though the results will come after the market hours at 5.30, market will have some anticipation as to where the number might come. The IIP numbers for Q2 came in at 6.5%, 4.7%, 4.5% in the three months which is almost same as Q1 months but the major factor is the corporate results of Q2 that came in almost flat at 2% compared to 12% seen in Q1. This according to me could be the crucial factor. Q1 has seen a GDP of 8.2% but matching that in Q2 is going to be tough. Q1 figure of 8.2% came from lower base of 5.6% seen in Q1 of last fiscal. The Q2 figure in last fiscal was 6.3% and that makes the base bit tougher so considering all these factors I can expect a GDP of 7.2-7.5% and agriculture GDP is going to be crucial and that could change things. 

What to expect from the December series?

Finally December series is here and last three december series have been positive with gains ranging from 1% to 2.5% and we had a 7% gain in November and will December also follow it up with same gain or not needs to be seen. The crucial factor is the election results on December 11th. Like Diwali which came at the mid of this series, election results also are coming at the mid point. I would thus like to divide this series pre results and post result part. If there is an uptrend till 11th then we might see some sell-off post the series. 

10500 put and 11000 call have the highest open interest to start with, but 11500 also has a good amount of open interest and so does 11200. So, the first part of the series if there is a rally can go to 11200 or even 11500 levels. Similarly, if there is a fall then we can test 10500 levels and in worst case 10200 levels. The series is also starting with 51% long positions vs 29% in November so there are more longs than shorts in the Futures market. The Nifty put-call ratio is also starting off at 1.72 which is over the heated zone and the overall roll overs from November to December is 71% which is higher than the average of 68% seen for the year 2018.

What is the Nifty call for the day?

Today is the first day of the series, Nifty will open bit gap up at around 10870-10900 levels and where it goes from there needs to be seen. There are too many fundamental factors affecting the market so for me today will be a wait and watch day. No positions to be taken, even if you see Nifty moving to 10950 after open. Keeping money safe is better than losing it taking risks. 

Market Trade Setup 29th November #NIFTY

Market Setup 29th November

Finally, we are on the expiry day for the 11th series of this year. What a way to end the series that started at 10070 levels with a big doubt on which direction the market will go. There were many who talked about 9500 levels and historically November was not a good series. Added to that is the Dovish statements by US Fed where they indicated that the interest rates would not be disturbed that much and they would observe the growth bit more carefully has pushed the Dow Jones up more than 600 points and the Asian markets are in the green. Added to that is the Brent Crude which as now fallen to 58.8 dollars on the back of Saudi Arabia which is refusing to cut the output.

On the domestics, the behaviour of the market from 2PM yesterday, we have seen a rally which indicates that BJP has done reasonably well in Madhya Pradesh and has pulled itself well in Malwa region where Congress was expected to make some gains. The SGX also is suggesting a 90 point growth which is 0.8% higher while Hong Kong and Japan are up 0.2 to 0.4%. This also says that the final unofficial numbers that would have come after market hours would have gone decisively the BJP way. Today is the expiry and so its the expiry factors that would play a major role. There was some re-casting done on GDP which I would keep it for later date.

Coming to the derivatives market, yesterday was an out and out bullish from afternoon and the Nifty put call ratio is at 1.81 which is now the bubble zone and on the expiry day it is usual. The series will come to an end today, so this is not a major factor. As predicted yesterday 10800 emerged as the strike with highest open interest on the call side and on the put side a lot of confusion is emerging and 10600 which remained till 2.30PM has given up and today it might again come back. But things are going to change rapidly when there is a gap up of 80-90 points that happens now.

What is the Nifty call for the day?

November series so far has seen 603 points gain and that means this is series belongs to bulls and now it is 6-5 in favour of bulls. The opening today is going to be at 10800 level which is where lot of short positions were taken and any expiry above 10810 level means lot of people will lose money. So, we need to see what happens between 10810-10830 zone. If there is a fall then 10750 might come as a support.

Following are the possibilities that can be visualized now

1. Opening at 10800, Nifty being in 10780-10830 zone till afternoon and a big 3PM move down to 10750 and an expiry at 10780 levels. This looks most probable now.

2. Opening at 10800, Nifty going to 10850 levels and then a 3PM move to 10780 and a close around 10800-10810 levels. 

3. Opening at 10800, quick fall in Nifty to 10750, spend rest of the day between 10750-10780 zone and 3PM move on upside taking Nifty to 10830 and close around 10800-10820 zones.

4. Opening at 10800, quick fall to 10750, spend rest of the day between 10750-10780 and a 3PM move down to 10720 and close around 10740 levels.On the back of these, I suggest you to keep the short strangle intact and dont take further positions. Today might not be as exciting as other expiry days are going to be.

So, I suggest no trading today, just observe and see how expiry pans out.

Market Trade Setup 28th November #NIFTY

Market Setup 28th November

Two days markets went the way I assumed it to go. I said that profits would be lesser yesterday compared to day before and thus we had a 50 plus point close on Nifty compared to 100 seen day before. But a 150 point uptrend in the last two days has brought us closer to 10700 now. The US markets were also positive last night with Dow Jones going up more than 100 points and the Asian markets are also looking good today. Hong Kong and Japan are up nearly 200 points and that will have positive impact on us. The Crude is also trading at the 60 dollar mark still and will be a good news for us.

On the domestic front, today is the polling day for Madhya Pradesh and Mizoram and MP is crucial for the markets. I urge you to watch the movement of Nifty between 2 to 3.30pm and that is when the reactions to the trend will be clear. As of now its a tight race between BJP and Congress with slight edge for BJP and any positive trend for BJP will mean markets will pick up in the afternoon. Any advantage to congress, it will start to move down. Markets will get unofficial trends right from afternoon. The other point to watch out for is the 50 and 200 day moving averages that Nifty has to deal with. 10660 is the 50dma and 10740 is the 200dma and Nifty is bound to gravitate between the two today. 

On the derivatives front, the options market was on fire yesterday though Nifty went up just over 50 points. The Nifty put-call ratio has jumped to 1.74 from 1.64 and thus entered the overheated zone. Since its the penultimate day to expiry we will not see much of an impact of PCR on the movement of the Nifty. 11000 call is back as the strike with maximum open interest but 10700 call is not far behind. If there is a fall today 10700 might pick the open interest, otherwise, 11000 or 10800 can emerge as the resistance for expiry. My view is it could be 10800. On the down side 10600 put is picking up open interest and expiry contours might shift from 10500-10700 to 10600-10800 levels. All of it depends on today’s movement of Nifty. 

What is the Nifty call for the day?

Two days running you have made good profits by buying calls. 10550 call gave 250% profit day before yesterday and yesterday it gave 90% profit. The 10450 short put that you would have picked up at 70-80 rupees premium is at 5 rupees now which means more or less you have pocketed that premium also. So, all that we are left is the long position taken almost a week ago in futures. Today morning Nifty might open a bit gap up above 10700 levels between 10700-10720 levels and 10740-10750 which is the 200dma might offer a resistance. I suggest you to exit the long as soon as you cross 10720 levels for a decent profit. Don’t take chances as tomorrow is the expiry day. For today am tempted to give a short straddle call and I would give that during the day looking at the premiums after the markets open. Till then exit the longs, take the profits and wait for my tweet for the short straddle.

Market Trade Setup 27th November #NIFTY

Market Setup 27th November

Yesterday was the day when markets obliged me completely. When there was a consensus around that it is a day for short positions, I went with long and that rewarded a lot. The 10550 call which I was suggesting you to buy with a view that premium will double by the end of the day more than doubled in the premium. So, after a handsome profit yesterday, today is another day. US markets have recovered a lot where Dow Jones went up more than 350 points and today Asia is in the flat zone with Hong Kong performing worse than the other markets. Hang Seng is down 50 points while Nikkei is up just 30 points.

Coming to domestics, it is mostly the technicals that is moving the Nifty today in the absence of fundamentals. The 50 day moving average is at 10650 and 200 day moving average is at 10740 and the major challenge for the Nifty today is to overcome the 10650 zone. If it is done then it will go to 10740 and that can be a big resistance point. The 20 day moving average is at 10480 which is a support so any drop in the Nifty will find the support here. On the macro front Brent Crude is at 60.3 dollars still and that is a good news for the market as Petrol prices drop below 80 rupees in Hyderabad and go to 78.54 rupees per litre. 

On the derivatives front, there was some positive action on the Nifty futures yesterday and the premium on Futures which was at 2 points discount has moved to a premium of 10 points. On the options market the biggest positive is the Nifty put call ratio which was at 1.46 at the beginning of the day has moved to 1.64 by the end of the day. As I predicted yesterday the 10500 put has overtaken 10000 put to have the highest open interest. 10500 put has 42.3 lakh positions vs 38 lakh positions for 10000 put. So, for the time being 10500 which coincides with 20dma of Nifty is the support. On the call side 10700 and 11000 are fighting for the resistance and it looks like 10700 will emerge as the resistance and the expiry zone will be set between 10500 and 10700 levels.

What is the Nifty call for the day?

Nifty might open today bit down around 10580-10600 levels and today it might go to 10650 level which is the 50dma. If it is overcome then the journey towards 10700 will start. On the downside 10550 will offer a strong support and in this market conditions you can do two things. Close all the existing long positions as Nifty approaches 10650 levels for no profit no loss zone. Second is any drop to 10580 level means you can go for a call buying at 10550 strike with 50% jump in the premium. You might not make as much a profit as yesterday but it is always worth a try.