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Market Trade Setup 16th May #Nifty

If you recollect my post yesterday, I had expressed concerns and worries related to many negative domestic factors and a few global factors. Does that mean that the re-building process and the 70 plus point gain on Tuesday was a myth? The answer is No. Everything is a part of the re-building and there is something called base formation or the bottom fishing, which is happening around 11100 zones and yesterday’s fall was also a part of it. The real reason for the fall yesterday was due to selling in the cash market but that is bound to happen whenever there is a rally. A falling market will become sell on rally first before turning into buy on dips. So, any rally will always be sold into and that’s what we saw yesterday. 

Today is a different day when Asia is a bit weak but for us, the cues are not looking very great and that is primarily due to trade deficit numbers that has come for April. April saw a trade deficit of 15.3 billion dollars vs 10.8 billion seen in March. This is not at all a good number especially because exports rose just 0.6% whereas imports grew by 4.5%. This simply means to increase our exports by 0.6% we had to import 4.5% more. Most of the imports were gold and electronics while exports in leather, textiles and other traditional manufacturing items have seen a big fall. One good news is the merger of Tata Global Beverages and Tata Chemicals to create an FMCG major called Tata Consumer Products Ltd. This marks the official entry of Tatas into FMCG to take on other giants like HUL, ITC and GCPL. 

On the derivatives front, there was some buying till the afternoon in Nifty futures and the last one hour fall saw an unwinding of many long positions that kept the Futures long positions percentage constant at 56%. The options will be the talk of the market today, as its weekly options expiry and the focus will be only around options. The put-call ratio dropped dramatically in the last hour to 1.14 from 1.28. Today’s weekly chart also shows 11000 put at highest open interest followed by 11100 put. On the call side, 11300 call added 16.3 lakh positions and it now has the highest open interest followed by 11400 call. However, 8.2 lakh positions were added to 11200 call yesterday followed by 11250 call that got 7.2 lakh positions added. 

What is the Nifty call for the day?

Today is the weekly options expiry day and we are likely to open in a flat to the positive territory around 11150-11180 levels and a look at options data suggest that the downside is open till 11020 mark while the first level of support will be coming at 11080 mark. If the market goes up after the open then 11190-11230 will be the resistance which Nifty has to first overcome. If that is taken out then you can expect it to go to 11280-11300 mark and we might see a very volatile expiry going as low as 11020 and as high as 11280. This is a huge range so, you would not want to trade in this volatile atmosphere. Keep hooked to your previous positions and if 11280-11300 is reached you can exit with profits. So, no new positions today and just keep watching how volatile Nifty can get. 

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