A gloomy start to the week and the gloom continues. After a 100 point drop on Nifty, that took Nifty to its lowest level in 2018, US markets also cracked yesterday on the back of the news that thousands of facebook accounts were accessed illegally by a research agency called Cambridge Analytica during the US Presidential election. That led to Facebook losing 7% of its value on a single day and that made Dow lost 350 points and that has put entire Asia on red. The two day FOMC meeting also starts today and that might be the last ray of hope that this fall would finally end. The Brent crude crossed 66 dollars and Rupee weakens to 65.20 and this is a double whammy.
On domestic front, there is a no trust motion that is likely to come up at any time and market is still worried about it. Other than that there are no strong fundamentals. But its the technicals that are worrying the market now. 200 day moving average of 10160 was just broken yesterday decisively and now the 200dma is moving towards 10200 now and we are on the verge of breaking 10000. Nifty has completed 9.8% correction from the top of 11180 and now with today’s gap down 10% correction will be complete. Now the point is how much more it will fall. Usually 10% corrections lead to some bounce back and are we going to see that or not needs to be seen.
On the derivatives front also, there is a lot of action seen on Futures. The long positions remained steady at 46% which means at 200dma nobody wants to really short this market as there is a fear of rebound. The early part of the day saw some selling and buying but the later part of the day the action moved to Options space.
On the options front the calls have become very attractive now, and for the first time in 2018, the number of short calls in the system exceeded the number of short puts. The 10100 and 10200 calls saw 10.2 lakh and 13.3 lakh contract built up while 10400 call still saw 6.8 lakh contracts built up. 10400call saw more buys where at 15 rupee premium any bounce back will hugely increase the premium there. On the put side 10000 put saw a maximum open interest of 16.6 lakh contracts built up and at 60 rupees premium 9940 is a possibility in this series now. The put call ratio dropped to 1.04 now from 1.09 seen at the beginning of the day.
What is the Nifty and Bank Nifty call for the day?
Today we need to take a stand. Looking from a bullish point of view we have seen from the sidelines how Nifty was falling. Now it has breached 200dma and closed below 10100 and today it might open bit gapdown because of the global factors at 10070 levels. 10050 is a support which if broken Nifty will test 10000 levels today and on the upside 10160-10180 might act as resistance.
You can try a risky trade of going short and long on the same day based on the swings. At the open, go short with an extremely short target of 10020 and there exit and go long with 10100 as the target. These need not be intraday targets nor should be taken sacrosanct. If 10020 is reached and after than Nifty is not showing signs of improvement then exit the long than face losses. This should be done with care and its too risky.
On the Bank Nifty front, things are worse now at 24100 level of opening could be shorted with 24000 as the target for the short. Then wait how it behaves before deciding what to do.