Tag Archives: Trading

Market Trade Setup 19th October #NIFTY

Market Trade Setup 19th October 

Last day of the week but not great way to start with. I had told you on Wednesday to exit your positions and you would have pocketed more than 140 points if you have closed your positions till 10am. What we saw on Wednesday was vertical fall from open of 10710 to 10450. This is more than 250 point fall. Yesterday we were not trading but there was a fall across Asia and that will surely be priced in today’s opening.  The Dow Jones fell more than 200 points yesterday on the back of news from Fed minutes that the interest rates cycle will continue and fed will keep rising the interest rates in future also. 

There were other bad news as well for the market with dollar index going up to 96 and that means rupee will again go back to 74 level today and might hit another all-time low. Added to that is the China GDP data for Q3 which came in at 6.5% which is the lowest we have seen in the last 9 years. Last time China had 6.5% GDP was in 2009 when World was going through investment banking crisis. The result is entire Asia is in negative. The only good news is Brent crude which is below 80 dollars now trading at 79.5 dollars.

On the domestic front bad news for China is good news for India and Chinese GDP drop might pull FII inflows into India. Crude below 80 dollars is also good for India so it is not such a bad scenario for India. The only negative for us is not so good Q3 results.  HUL though the numbers were good the margins disappointed. Same is the case with Reliance which also showed some margins pressure and ACC cements also was not upto the mark. So if today’s results disappoint things might be under pressure otherwise things are not as bad as they look.

On the derivatives front was a massive selling that happened on Wednesday with NIFTY started to fall. The NIFTY premium which was at 5 points at the open ended into a discount of 10 points by the end of the day. The story is clear. A lot of bearish positions were built on Wednesday and a gapdown today means a lot of short covering that can be seen. On the options front the NIFTY put call ratio dropped to 1.11 from 1.20 on the back of increasing demand for calls. 10000 put and 11000 calls still stand as markers but expect that to change today.

What is the Nifty call for the day?

A gap down is expected and if nifty opens below 10400 then expect a short covering for all those positions taken on Wednesday which might take the market past 10500 and even as high as 10580. Adverse news might make nifty test 10300 levels. A day like this is better to wait and watch than take any positions. Weekend is always a time for less risk so no positions for today.

Market Trade Setup 25th September #Nifty

Another red Monday with a more than 100 point fall has brought Nifty back to below 11000 mark and if you think the worst is over, we still have some of the worse still to come. The 200dma of Nifty is at 10750 and Nifty will try to negotiate that and it means we have another 200 point fall yet to come. Bull markets have their corrections and we have completed 7% of that correction and another 3% might take us around 10600-10700 levels and when that happens, its just the matter of time. But to lose 700 points in a month and 500 points in just 10 trading sessions is not at all a good thing.

The global scenario is also not that bright with Dow closing more than 180 points down on the back of worsening tensions with China and the sanctions with Iran also coming into picture now. The Fed meeting begins today for the Credit policy and there is an expectation of 25 bases point rate hike coming out tomorrow evening. But the biggest negative is the Brent Crude which has surged to a 5 year high of 81.3 dollars and we are above that dreaded 80 dollars and with Rupee worsening things really look ugly. Rupee closed at 72.63 yesterday and today we are surely going to see 73 and if it closes above 73 then its going to be worse for the current account deficit in India. On the Yes bank front, Rajat Monga who is the group VP and ex CFO of Yes bank could be the new boss as things stand today. But lot of time to go before anything is decided.  

On the derivatives front, there has been some buying that has come back to the futures after the battering we got but that is simply not enough to prevent the market from further sliding. The Nifty put call ratio in the options market has come down to 1.05 from 1.14 and this is the lowest I have seen in this year. For sometime in February it went to 1.05 and now we are back to same level again. Call are sold freely and there are 10 calls sold for every 1 put sold and that is contributing to the fall in PCR. 10800 put is now picking steam with 9.4 lakh contracts added and the gap between 11000 and 10800 put is just 6 lakh contracts so the danger of base moving to 10800 from 11000 is there. On the call side 11200 call is just 1 lakh contracts less than 11500 and today if there is a fall the roof will shrink to 11200 from 11500. 

What is Nifty call for the day?

A flat Asia means we will also open flat below the 11000 mark and with Crude above 81 and Rupee reaching 73 could be a deadly combination that could take the market into red. The fall has no limit and 10770-10740which is the 200dma range is the last support. On the upside Nifty wont go above 11200 levels and 11150-11180 might be a strong resistance. As said many times, money in the pockets is better than money in red. So, stay out and see which way the market goes.

Market Trade Setup 17th September #Nifty

Market Trade Setup 17th September

Second half of the September month starts off on a not so good note. We had seen two monster rallies after two big falls on the first two days of the last week. Now Nifty is above 11500 but there is nothing much to celebrate. There was a storm that has hit North Carolina last weekend, we also have a typhoon hitting Hong Kong and that has shook the Asian markets. Hong Kong is down more than 500 points and all the other indices like Shanghai, Korea are also trading in red. Dow Jones on its part had closed flat on Friday and that doesnt matter really that much.

On the domestic front, the news is all about the cabinet meeting that PM and FM called on Saturday to review the economic situation came out with nothing in concrete. The only positive was FM saying very clearly that the 3.3% target of fiscal deficit would be met at any cost. An announcement was also made on increasing the FPI investment in masala bonds but at a time when rupee is falling this doesnt matter much. There was nothing on rupee or falling GST collections or on the bank restructuring or on FCNR bond issue and all this has left everyone disappointed and this would be visible in currency and bond markets today and that will have impact on Nifty. Dont be surprised if Rupee goes to 73 all the way from 71.8 that is the closing value on Friday.

On the derivatives front, the surprising factor on the trade on Friday is, despite Nifty going up 140 points the premium on Nifty futures shrunk to 32 from 40 points. The overall long positions remained at 44% indicating that though the Nifty is going up, not many are taking long positions and risk it to taking on Monday. So, why was Nifty moving? It is because of the action in Options market where the Nifty put call ratio went up from 1.29 to 1.38. There were puts bought and puts sold also. There were 3 puts bought for every 2 calls and there were 5 puts sold for every 3 calls sold. 11400 put still continues to have maximum accumulated open interest and on the call side it is 11800 call.

What is the Nifty call for the day?

Our fundamentals on currency market going to hit Nifty today and Nifty will open gap sown at around 11470-11480 levels and it might test intraday low of 11420-11450 levels. I feel that it is a single day disappointment and we might start recovering from the time Europe opens in the afternoon also. So, the better strategy is to go long when Nifty is in that 11420-11450range with a 50-60 point target to be achieved either today or tomorrow. There is a fundamental involved so the timing of the long position is critical and should be taken only after confirming that the last low intraday has been made.

Market Trade Setup 14th September #Nifty

The last day of the 2nd-week approaches and what a week it was. There were only 3 trading days so far and first two days saw markets falling nearly 300 points and Wednesday saw a recovery of around 80 points.  Global markets were bullish yesterday when we were not trading and Hong Kong went up more than 600 points and Dow Jones last night went up nearly 150 points. Today also Asia is trading in green and most India is looking like opening with a big gap up.

On the domestic front, the big news on Tuesday evening post market hours was IIP and CPI data which came almost as per the expectations. CPI inflation came in at 3.69% which is much lower than 4.1% seen in July. This was primarily due to the drop in food inflation especially the vegetables. I had expected that in my Wednesday post. Food inflation came at just 0.2% compared to 1.3% seen in the previous month and vegetable inflation came at as low as -7%. IIP also meanwhile has come at 6.6% for July which is marginally lower than June IIP of 7%. The big factor on Wednesday was the rupee recovery. Rupee at one point went all the way up to 72.91 before recovering to 71.86 and closed at 72.18. Crude also came back sharply after touching 80 dollars and now trading at 78.3 dollars. This will bring some positive sentiment to start with. 

On the derivatives front there was selling happening in Nifty though markets went up yesterday. The overall long positions in Nifty now stands at 43% down from 44%. But there is some good news on the options front where the nifty put call ratio went up from 1.24 at the beginning of the day to 1.29 at the close. 11200 put has added 3.6 lakh positions and on the call side 11400 call added a maximum of 2.7 lakh positions. Now 11400 put still continues to hold maximum accumulated open interest of 41.4 lakh positions and on the call side 11800 call has 43.4 lakh positions. So at 110 premium 11290 and at 10 rupees premium 11810 are the floor and the roof for the market respectively. 

What is the Nifty call for the day?

A green Asia and missed out trade means we will open gap up almost 80 points at 11450 levels and from there 11500 is a huge resistance. On the downside 11380 might act as big support. I suggest you go long if NIFTY drops below 11400 levels with 11450-11480 as the target. This trade can be taken before 9.30 or anytime in the trade or after 3 pm. If taken after 3 pm consider taking the position to Monday.

Myths & Realities of Options Trading Indian Stock Markets #Trading

Just to update, Indian Stock market is on fire and is doing fantastically and for last one week, it’s making an all-time high on a daily basis and trading at 11750 now. Not very long ago people were talking about corrections and fall in the market, which never happened. In many of my last posts, I have spoken about the importance of the Stock Market as a financial instrument to make money. Most of you would understand the Stock Market well, the actual motive behind the investments in stocks is to make profits. But unfortunately, when stocks fall and you lose your money it shakes your faith on the stock market.

That’s something which is not in your hands, but yes what is in your hands is to cut losses even in falling markets and that is possible only in ‘Options Market’. To trade in options market, all you need is a decent portfolio of stocks which is not less than 1 lakh rupees.

If I have explained options in simple words, here it is: Let’s say that you are the owner of a house, and the value of the house is a 30 lakh rupees. Suppose you need money on an urgent basis and you in short of cash, you can pledge the house and raise funds to meet your needs and then slowly you can re-pay it back in installments. After you clear everything, your financial need is met, as well as the ownership of the house is also with you.  In another case, let’s say that you have instead of pledging the house as collateral, you will given the half of the property for rent to make money. This will make it more easier for the people as you get the rent money which can be used to pay back the money you borrowed.

Options are also something similar. Your stocks in the portfolio can be used as the collateral in options and you can make money with ZERO investments as the collateral is only required to shown. This is one of the good ways of utilizing your portfolio to make that extra cash when the portfolio is making losses. As mentioned above all that you need to have is at least 80,000 to 1,00,000 rupees worth of stocks. Then you can go for trading in Options markets.

Let me now tell you a bit more about Options.  There are two types of Options Contracts: Calls and Puts.

Suppose you are expecting that market will fall a bit, then showing your portfolio as collateral you will sell a call. If the market actually falls, then you get the entire money that you sold the call option. In other case, if you feel that the market is going to rise a bit, then you can sell a put for the same collateral. If the market rises, you make profit by getting all the money that you have sold the put for.

These Calls and Puts are the two sides of the Option Chain and are risky to trade.  But there are many people who actually trade in the options market and lose lot of money. That failure can be mainly because of the improper understanding of the market. So don’t enter the options, if you are not completely aware and take the advice of a professional who you can trust, before entering the market.

Lastly, the reason for writing this article is because, these days many demat accounts are coming with options trading and the greedy companies pull innocent people by giving them wrong picture about options. Options are to be traded only after knowing everything about it totally and it’s something that can be easily learned. All that is required is common sense and presence of mind. This is just an introductory article to give you broad overview of options. I will come up with more articles in future that will teach you options trading in a simpler way. That way you can prevent yourself from getting cheated by greedy stock broking companies.

Market Trade Setup 3rd September #Nifty

September starts on a note that it is known for. Septembers always have been cautious and no over-optimism or pessimism. That is why if you compare the last 3 years Septembers were always flat not getting carried away either by good news or bad news. Let’s hope that this September also behaves the same way. The US markets were flat on Friday and today they are shut on account of labor day so no big clues available. Asia is down on account of trade wars in Europe emerging slowly. Hong Kong is down more than 250 points and other markets were down anywhere between 0.5% to 1%. 

On the domestic front, the big news that will move the market today is the GDP number that came at 8.2% and the GVA number that came at 8%. For a 8% GVA if the tax collections were good then we would have seen a 8.3 to 8.4% GDP but 8.2% indicates lower tax collections which is a worrying point. Another worrying point is the drop in the services sector GDP has actually been lower than 8.2%. The good point is manufacturing that grew 13.8% and excellent numbers from construction and Agriculture that indicates that jobs are getting created in the unorganized sector.

The other domestics are the very good numbers that have come from the auto sales in August and this could be positive. Commercial vehicles grew very well led by Ashok Leyland reported 28% growth in commercial sales, Tata Motors commercial vehicles grew at 26% and M&M commercial vehicles sales went up 25%. Maruti, Hero and TVS saw a drop in sales due to Kerala floods. Now coming to the negative fundamentals its the strengthening dollar again where the dollar index crossed 95 and stands at 95.2 now. That means fresh pressure on Rupee and we might see Rupee tumbling to another all time low. On the other hand the Brent crude prices are still holding on and not showing signs of falling. They are still around 78 dollars per barrel.

Derivatives Action

On the derivatives front, the first day saw a massive short build-up in the Nifty futures and the percentage of Nifty long positions came down from 64% to 60%. On the options market also the shorts in the calls side is more than the shorts on the put side. But when it comes to longs, there were 2 puts bought for every call. The put call ratio now stands at 1.55. 11600 put added 7 lakh contracts and 11500 put added 5 lakh contracts and 11700 put added 3.1 lakh contracts. With this the 11600 put has the maximum accumulated open interest now and that means 11520 will be the new floor for the market in this series. On the call side 12000 call added 5 lakh contracts and 11800 call added 4.9 lakh contracts and 11800 still has the maximum accumulated open interest. At 100 rupee premium 11900 could be the new roof. 

What is the Nifty call for the day?

GDP numbers will make our markets open in green at 11700 levels and the long position you have taken on Friday at 11640-11660 will have a 40-60 point profit. First resistance might come t 11720-11740 zone and Nifty might correct to 11650 intraday after touching this level. So, it is better to exit the long positions as soon as 11720 is reached. The minimum profit you are guaranteed with is 50-60 points. As the market starts negotiating this positive and negative factors, stay out and see where it closes. Any close below 11680 is not good for the near term.

Market Trade Setup 23rd August #Nifty

Markets and News

The second half of the week starts after a break yesterday. Two just left in this week and we are into the expiry week finally. Things look different now from what they were when we went for a break. Dow Jones has lost nearly 90 points in yesterday’s trade and the big news is Brent Crude. The US inventory data shows a significant drop in its inventory and that has pushed up the demand for Crude and Brent Crude is now racing towards 75 dollars. Asia is showing some green and that might work well for India.

Coming to domestics, there is a lot of micro-news affecting specific companies rather than a sector getting affected. Most prominent of them is the Nestle breaking its business into 15 clusters and that would mean India will emerge as a separate conglomerate and that would mean more autonomy for Nestle India to do its business locally. HDFC AMC which saw listing recently declared its Q1 which saw a 21% jump in the revenues and that justifies the premium that the stock got. In the snack market, Pratap snacks acquire 80% stake in Avadh snack of Gujarat and that will further expand the footprint of Pratap snack in Western India market. 

On the derivatives front, there were equal amounts of long and short positions taken on Tuesday and Nifty long positions is stuck at 51% and it looks like a 50-50 market from here when it comes to longs and shorts in Futures. Options market however saw some demand coming back to calls in the morning when Market corrected a bit and as a result the Nifty put call ration corrected to 1.70 from 1.73 seen at the beginning of the day. 11500 put added 6.6 lakh contracts while 11600 put added 2.7 lakh contracts and even 11700 put started adding open interest where 1 lakh positions got built.

But many positions saw a drop in open interest and 11300 put saw 4.2 lakh positions closing followed by 11200 put that saw 3.4 lakh contracts getting closed. 11100 put saw 1.1 lakh contracts and 11350 put saw 1.5 lakh contracts getting closed. On the call side 11800 call saw some action with 1.5 lakh contracts getting created and 11750 call got 1.1 lakh contracts. 11600 call and 11400 put still continue to have maximum accumulated open interest and that means 11650 to 11380 is the levels that Nifty will try to negotiate during this week. 

What is the Nifty call for the day?

A mild to green Asia means we will open close to 11600 and that will be another all time high. Mind you, Nifty has the legs to go upto 11650 and dont be surprised if it goes to 11650-11680 range. On the support side, 11550-11570 will be  a support zone. Also understand that 11380 is the floor for the series so any adverse news on crude can take the market on downside to 11500 levels. So, expect some volatility. This is the time to shift to options now and a short straddle is what I suggest you to take. When to take is something I will be telling you during the course of the day.

Market Trade Setup 17th August #Nifty

Markets and News

Weekend is here and a sad news to end the week. One of the greatest Prime Ministers that India has seen, a poet, orator, journalist and a philosopher, former Prime Minister Atal Bihari Vajpayee passed away at 5.05PM yesterday at the age of 93. Homage to the great son of India and a loss that cannot be filled in, in the near future. Coming to markets, there was a huge green yesterday as Turkish Lira started rebounding and gained 25% of its lost value. Dow Jones has gained more than 300 points and all the Asian markets are in green celebrating the re-bound of the Turkish Lira.

Domestic Cues

Coming to the domestics, Rupee has hit another all-time high today with Rupee touching 70.50 level before recovering a bit. We need to see if Rupee will reversing the trend or not needs to be seen. Today is a holiday for the money markets on account of Parsi New year so the 70.15 level at which rupee closed will be final value till next week. On the Brent Crude front, its right now at 71.1 dollars and that continues to be the good news. There might be some impact on the oil, paint and tyre stocks as the Brent is now firmly settling around 70 dollars now.

Derivatives Action

On the derivatives front, there has been selling that is happening in the Futures market but it is offset by buying that is happening at the lower levels. In options market the Nifty put call ratio corrected to 1.60 from 1.70 seen at the beginning of the day yesterday. Positions were wound from every level and 11000 put saw 3.1 lakh positions unwound and 11300 put also saw 1.6 lakh positions unwound. On the call side 11500 call added 3.3 lakh positions and 11400 call saw 2.8 lakh contracts being added. Even 12000 call saw 3.1 lakh positions built and that is the surprising news.

What is the Nifty call for the day?

We did not react much for the falling Turkish Lira, so we will also not react much for the appreciating Turkish Lira. So, our markets depends today on our fundamentals and we might open again around 11400 levels. Yesterday, if you had gone short at 11420 levels you would have met your target of 50 points when it fell to 11360 levels. Today might be more of side-ways movement and the bias is more towards downside than upside. So, I suggest stay away from taking any new positions. Lets start the fresh trade on Monday.

Market Trade Setup 9th August #Nifty

Markets and News

Another new all time high hit yesterday and the market is moving only higher, higher and higher. The US markets are also playing the ball and yesterday NASDAQ posted 7 session positive closing which is happening only second time this year. Dow Jones took a slight breather last night when it closed 50 points down. The best news is coming from the Crude oil front, where Crude it a 7 week low with brent crude falling below 72.5 dollars straight from 75 dollars. Asia is gravitating between mild red and mild green.

Domestic Cues

On the domestic front, the story of this month has been coming back of FIIs to the Indian markets. In May and June FIIs sod in cast market and July saw an almost flat action from FIIs. August however saw some positivity and they bought 1134 crore and that means money is coming back to India from FIIs. On the other news, HPCL and BPCL have reported weak numbers on the back of increasing Crude price and pressure on margins. NMDC is down but they look much better than expectations. In the pharma space Cipla has come up with a decent set of numbers.

Derivatives Action

On the derivatives front there has been a mixed action on the futures front and the Nifty long positions on futures remained constant at 58%. However the action on options front was different with a lot of demand getting created for options. The Nifty put call ratio rose to 1.77 from 1.67 and that is the big worry. 11300 put added 7.9 lakh contracts and 11400 put added 7.8 lakh contracts and 11500 put added 3.8 lakh contracts. On the call side 11700 call added 2.1 lakh contracts while in all the other strikes there was unwinding of positions.

What is the Nifty call for the day?

A flat Asia means we might open flat around 11450 and these all time high areas really dont have markers. Crude is positive but the internals are putting pressure on markets. If FIIs continue buying in cash market, it will make Nifty to go up, but this is an exhausted Nifty and 11480 is a zone where it might halt. On the down side 11400-11420 is a support zone and we need to see whether Nifty has the mojo to cross 11480 or not.