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Market Trade Setup 4th January 2019

The worries of Apple have consumed the NASDAQ which fell more than 3% on a single day and Apple tumbled more than 10% on a single day which is the worst performance since 2013. It lost on a single day the market cap equivalent to Infosys, TCS and HDFC. The fears that Apple cannot go any further from here has pushed US into searching who is the next Apple in NYSE. There was a time when Microsoft held that position now it’s going to be either Amazon or Netflix depending on how things move from here. Dow Jones is down more than 650 points and that send Asia on a downward spiral at the open. But after selling there is always a tendency to look beyond and that is triggering a buy, which brought almost all Asian markets except Japan into the flat territory. 

On the domestic front, the political scene has started to boil with election announcements just another 2 months away. Brent Crude is the news for us which went up to 55.7 dollars. Another major factor is the fiscal slippage that we might face and it could be as high as 1.5 times. The farm package is on the way and it could happen today or during the weekend. The rupee has crossed 70 again and this is something that is happening on the rising bond yields. All this is due to the fiscal management and till the time there is clarity on this, Rupee and bond markets will continue to be in pressure. 

On the derivatives front, yesterday was a very bad day for Nifty as it lost nearly 120 points. The F&O trade was worth 18.8 lakh crore yesterday out of which Index options accounted for 17.9 lakh crore. Index futures also had 2.97 lakh contracts most of it were short positions on Nifty. With this, the overall long positions came down to 48% at the end of the day from 50% seen at the beginning of the day. The Nifty put call ratio also fell to 1.34 in the evening from 1.47 seen at the beginning of the trade. The biggest factor to consider was a 11.1 lakh contracts disappearing from 10500 put and the open interest stands at 39.7 lakh and 10000 put added 4 lakh contracts and the open interest there stands at 32.2 lakh.

On the call side 11000 is consolidating itself as the strike with highest open interest and has 39.1 lakh contracts and yesterday itself it added 8.2 lakh contracts. 10900 call added 7.5 lakh and 10800 call added 6 lakh contracts. 11200 which was the highest open interest till yesterday is now 2nd with 32.2 lakh contracts. So, its 10500-11000 is what the range seems to be. If there is a decline in Nifty today the 10000 put will add more open interest an that would mean the downside will start opening up for 10000 also. On the call side, 10800 is building up as a call that can replace 11000 call too.

What is the Nifty call for the day?

Yesterday, I started you to stay out of the market and for a bull it worked perfectly. There would have been no way that you could have made profit yesterday. We will have a flat start today around 10670-10700 levels and on the downside 10620-10640 will offer as strong support. Nifty will really need a very bad fundamental to breach this level and on the upside 10780-10800 is the resistance with an intermediate resistance at 10750. So, my call for the day is if Nifty holds 10650 then it is better to initiate a long trade anywhere above 10650 to 10710 levels with 10750 to 10800 as the target. The ranges are very huge because the market itself is very volatile.