Nifty Trading Ideas

Market Setup 21st February

Markets and News!

Penultimate day of expiry of the shortest series of the year, but it has also turned out to be the most volatile series of the year. US markets continue to be volatile with Dow losing over 200 points to close below 25000 and the Gold prices are tumbling down. The US 10 year yield is now at a 4 year high and that is adding to the volatility. Brent Crude fell below 65 dollars as US supply of crude went up. China will be shut today also and will come back for trade tomorrow after completing 1 week of holiday for Lunar new year. Otherwise Asian markets are trading in green as of now in an environment that can change any moment.

Domestic cues

On the domestic front, the PNB scam is getting dirtier day by day and now Govt has made its unhappiness on RBI not checking on the banks. Finance minister yesterday raised questions as to how neither RBI nor the auditors have any clue on what is happening inside the banks. The Rotomac scam involving Bank of Baroda is also one such case which exposes the vulnerability of PSU banks and how they can be exploited. Rupee has seen a biggest intraday fall of almost 1% and rupee is at 64.80 now and dangerously close to 65 dollars. The 10 year is climbing with everyday and now has reached close to 7.7% and now we are on the verge of seeing 8% yields again! Every rally is getting sold into indicating that nothing is going fine.

Derivatives Action

On the derivatives front, yesterday saw Nifty futures getting into deep discount of 17 rupees which we have not seen in many days. Close to expiry the premium amounts will be small because of low time value but futures trading at a discount of 16 points is something that is unusual. If you look at the overall long positions in futures it is just at 41% which is the lowest in the series. That is not a good news. On the options front 10400 and 10350 calls added maximum open interest. 10400 call saw 4.2 lakh contracts and 10350 call saw 4.1 lakh contracts. That takes us to 10410-10420 range which is seen as a roof now. On the put side 10300 put saw maximum contracts of 9.1 lakh build up indicating at the series low of 10270 could still be sacrosanct. That puts the expiry markers between 10270 and 10420. The Nifty put call ratio remained more or less stable at 1.10 vs 1.07 seen at the beginning of the day.

What is the Nifty and bank Nifty call for the day?

Asian markets are indicating that there would be a gap up and Nifty might open close to 10400 mark. 10420 is the resistance and selling might start between 10420-10450 zone which might bring Nifty back to under 10400 mark. On the downside 10300 is a support and many traders might want to take a short position as soon as market opens gap up. Risky traders can always look at that trade of shorting at 10380-10410 area with 10320-10300 as the target. But if you ask me, I would prefer sitting quiet and watch the Nifty. When volatility is so high, its risky to take any trade and its better to stay out. Let this series expire tomorrow, then you can look at starting afresh in the March.

Bank Nifty could be still under pressure and 24651 is the 200dma of Bank Nifty and it is around 200 points away from that. If Bank Nifty also opens gap up like Nifty around 25000 then there can be shorting which might bring it down to 24650 levels and see if you can take that trade. Else it is better to stay out and watch the expiry.

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