Market Trade Setup 25th October
Finally, the series that was the most treacherous this year is coming to an end. Finally, expiry day is here and we are going to start on another negative note. There was a massive sell-off in the global markets yesterday and that started off with Europe yesterday afternoon. What started off as a minor sell-off became a major 600 point fall for Dow Jones which is the biggest fall for Dow this year and with this, it practically erased all the gains made this year. The main reason for the fall is the increasing inflation which it is feared, will result in an increase in interest rates thus moving money from equities to bonds. Asia also followed the trend and Japan is down almost 700 points now and Hong Kong is down nearly 500 points. All the markets in Asia are in deep red.
Coming to domestics, today is the expiry day and this series clearly belongs to bears as the fall is almost 753 points till now. This if we compare to 700 points in the last series we are almost 1500 points down in two months. This will make it 5-5 for bulls and bears and we start November with almost no gains. We were at 10500 in January and right now we are at 10200 and that means we are losing almost 3% of wealth year to date. The positive series did not gain as much as the losses that negative series has had. February, March, September and October all the series lost more than 500 points. The only fundamental that is positive for us is Crude oil which has now gone to 75.4 dollars from 76.5 dollars yesterday and that brings no cheer for the market.
Coming to derivatives, there was a lot of volatility in the futures market as the market started to fall, rise, fall and then had a major up-move in last one hour. The roll overs in Nifty futures were higher than average at 65% and with still a day to go, there is a belief that November series will be better than October. Options market also has a different story to tell as Nifty put call ratio moved back to 1.10 from 1.04. There were some short puts taken at crucial levels and that resulted in PCR moving up. 10000 put added 5.9 lakh contracts and still, it continues to be the base for the market. On the call side, however, the base shifted from 10500 to 10400 where there are 30.3 lakh open positions compared to 30.2 lakh positions at 10500 strike.
What is the Nifty call for the day?
A red Asia means we will also open in deep red around 80-100 points lower and that means we will start at 10150 mark. There are few scenarios that can be built from here.
1. Nifty starts going up from 10150 go to 10250, stabilize there have a 3PM move which takes the market to 10300 and close just below there. The other scenario is a fall from 10250 at 3PM and close above 10200 but below 250.
2. Nifty remains in 10150-10200 range for a long time till afternoon and then have a 3 PM move up that takes it to 10250 and close between 10200 and 10250. The other scenario is a fall from 10200 back to 10150 and closes below 10200 mark.
3. The Nifty starts to fall again and test 10100 and remain there till 3PM and a 3 PM move upwards taking it to 10150-180 zone and expiry t 10150 level. A downward 3 PM move will make it close below 10100 mark above 10050 mark.
4. This is a dreaded scenario where there is a fall below 10100 and a 3 PM move sharply taking it below 10000 mark and might close below 10000. This is a remote but a 5% probability. So my call for the day would be to stay out.
I have given you a buy or a sell call in 8 out of 10 expiries this year and today am asking you to stay out. Expiry days are good to trade but with so much volatility around, money in the pockets is better than money thrown into a whirlpool.