(Please read the previous weekly post 16-20 April too )
Though the structure of Nifty futures got destroyed in the see saw trade that we saw on friday, it managed to close to 5300 level (much below the resistance zone of 5330). It is forming a triple top around 5360 region which is a very bad signal to go for long positions. On friday's post i did mention about the volatility index,its effects on trading and we could see a considerable uptick in volatility in the previous trade. These kinds of sessions would be well utilized by options writers as they are getting some extra premium in terms of time value. If we could see levels of 15-16 in volatility index ( talking about India VIX ) before nifty reaching 6000 levels these kinds of trades would again happen and options traders would have a definite edge over the retail traders.Though it made a low of 5000 if we look at the charts we could see levels of 5230-5240 as the low where there are lots of buyers are still there and this would be an important support zone to be watched. As mentioned in the previous post bank nifty is one major index that does not allow nifty to catch up the upward momentum and all the banking stocks don't look good at all. On the upside nifty is yet to break the previous week's high and till that high is broken nifty would slowly come to the lower end of the channel which is placed at around 5180 - 5200 levels. If there is a valid breakout it has to happen with good volume and it did not happen yet. In the commodities market copper has really given a good short covering rally but Indian equity market could not gain anything from that.It is evident that nifty is waiting for some good news from the results season and the bigger range bound market is still intact. If you are options trader this is the best way to make some money but nifty is giving little chance to futures trades. Going forward 5230-5240 would be the stop for any long positions as lot of long positions can get squared off below this zone and it would really be a stock specific market as nifty is not showing any reversal till 5350-5360 levels are taken out on the upside. Thus we can keep a range of 5230 - 5360.
Though the structure of Nifty futures got destroyed in the see saw trade that we saw on friday, it managed to close to 5300 level (much below the resistance zone of 5330). It is forming a triple top around 5360 region which is a very bad signal to go for long positions. On friday's post i did mention about the volatility index,its effects on trading and we could see a considerable uptick in volatility in the previous trade. These kinds of sessions would be well utilized by options writers as they are getting some extra premium in terms of time value. If we could see levels of 15-16 in volatility index ( talking about India VIX ) before nifty reaching 6000 levels these kinds of trades would again happen and options traders would have a definite edge over the retail traders.Though it made a low of 5000 if we look at the charts we could see levels of 5230-5240 as the low where there are lots of buyers are still there and this would be an important support zone to be watched. As mentioned in the previous post bank nifty is one major index that does not allow nifty to catch up the upward momentum and all the banking stocks don't look good at all. On the upside nifty is yet to break the previous week's high and till that high is broken nifty would slowly come to the lower end of the channel which is placed at around 5180 - 5200 levels. If there is a valid breakout it has to happen with good volume and it did not happen yet. In the commodities market copper has really given a good short covering rally but Indian equity market could not gain anything from that.It is evident that nifty is waiting for some good news from the results season and the bigger range bound market is still intact. If you are options trader this is the best way to make some money but nifty is giving little chance to futures trades. Going forward 5230-5240 would be the stop for any long positions as lot of long positions can get squared off below this zone and it would really be a stock specific market as nifty is not showing any reversal till 5350-5360 levels are taken out on the upside. Thus we can keep a range of 5230 - 5360.
As per time cycle a fall below 5200 will make things difficult for nifty to catch up any momentum till around 5-6 th of May (see the attached chart). If you are an options trader if nifty cracks below 5230 - 5240 go for bull call spread by first selling your out of the money calls and wait for a buy trigger to buy the at the money call.Thus execute the strategy in different steps as one can increase the spread between the bought and sold calls.
(Execute the trade only if you are aware about the risks involved in options trading)
Stocks with negative bias (below previous day's low)
YES bank , DLF , JP associates
