Market Trade Setup 7th February #Nifty

Market Setup 7th February

Yesterday I was talking about whether the Nifty will break the 10980 resistance or not which Nifty tried 11 times before. Finally, it was broken and broken emphatically. Now 10980 will be a support to watch out for. But the point is the break out has to sustain and today is the day we will see that. US markets closed flat last night with Dow Jones falling 20 points after a 170 points up on two days. The Q4 data is coming positive in US with important companies like General Motors coming with a good results. Asian markets are shut even today on account on Chinese lunar new year and Japan which is the only trading market is 100 points down. Brent crude is still at 62 levels. 

Coming to domestics, today is the monetary policy day at the mid day you will have market reacting in full measure to the policy. This is new Governor’s first policy and three things are important. First is the rate cuts, second the tone of the policy and third are the forecasts. On the rate cuts there is a very slight chance of a 25 bps rate cut, coming now or in April policy. The tone of the policy is going to be changed from calibrated tightening to neutral. And third the inflation forecasts are going to be revised to 4% for first half of 2019 and if all this happens markets will surely rally. Today’s Q3 results include Aurobindo pharma, Britannia Industries, Cadila health, Coffee day, MRF tyres, Suzlon energy and Tata Motors.

On the derivatives front, yesterday saw a fantastic action in the Nifty Futures market where a plenty of long positions were added as Nifty climbed the 11000 mark. There were 34 long positions taken for every short position and that brought the Nifty futures long positions from 46% at the start of the day to 52% by the end of the day. Now we have more longs than shorts in Nifty futures. On options front also the Nifty put call ratio surged to 1.82 from 1.68 level with 10900 put adding 12.2 lakh contracts and 11000 put adding 13.8 lakh contracts. 10700 put has the highest open interest and its closely followed by 11000 put. On the call side 11400 call added 2.2 lakh positions and 11300 call added 2.1 lakh positions. 11000 call still has highest open interest and we need to see whether 11200 call can gain some open interest today or not. 

What is the Nifty call for the day?

Today we will have a flat opening to Nifty around 11030-11060 kind of opening and with the put call ratio in over heated zone of above 1.8 we need to see if this level can sustain or not. 11000-11020 is a crucial support level and if it holds then we can look at Nifty going up to 11100 level. So, I would suggest you to wait for a dip to come around 11020 levels and take a long with 11100 mark as the target, either today or in the coming days. Understand that monetary policy is coming at 11.45 and if required wait till that point to see if 11000 holds or not before taking the long position. Don’t rush into it and get trapped, even if you take a position before 1PM also it is fine. The targets can be extended to tomorrow also if required. 

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