Analysis and Game Plan - 24 October 2018

  • Crude Oil fell more than 4% yesterday. Might make sentiment positive for indian markets and we may have a gapup.

  • Dow jones plunged in the start only to recover for the rest of the day.

  • SGX Nifty is up by 50 points. Waiting for it to settle by the opening hours.

  • SGX Nifty does not always correctly indicate the opening. Our markets can still open 100 points up ignoring it.

  • While Nifty is constantly closing down for last 4 days, Bank Nifty has closed almost at the same point for last 3 days. Give or take few points.

  • Future OI suggests shorts been added to Nifty.

  • Nifty max pain drifted further low to 10400 and pcr came down to 0.71 which is bearish.

  • Despite volatility and market going down, vix came down by 10%.

  • Strike Price at 10200 added Call OI of 14 Lakh and Put of 10200 unwinded an OI of 11 Lakh. Its bearish.

  • Technical Charts on Daily, 2 Hourly and 30 Minutes are all bearish.

  • For Bank Nifty, based on every day closing it is harder to tell whether future OI is bullish or bearish. Based on data shorts are added. But there is either accumulation or distribution going on.

  • Trend on Daily chart and 30 minute is bearish, on 2 hourly charts, it is sideways.

  • Bank Nifty pain moved further down to 25100 and PCR to .74 suggesting bearish trend.

  • There was more call writing than put writing. 25100 to 25300 added good OI in calls. While 24700 and 24600 added put oi.

  • Kotak Bank results are scheduled today which might add to volatility.

  • Bharat Financials results is also due. It might have an effect on the movement of Indus Ind Bank.

  • On Banking stocks, HDFC Bank, ICICI Bank, SBIN, Axis Bank, Yes Bank saw call writing and put unwinding in most of the counters. Not taking it as an indicator to any trend given the volatile nature of the markets.

Conclusion-

  • Market may open high.

  • I am expecting markets to be highly volatile given the global cues and result announcement of Bank Nifty heavy weights.

Game Plan-

  • Given the steep fall in crude prices and looking at sgx nifty, nifty may open up 60-70 points and bank nifty may open 150-200 points up.

  • Data is not supporting any longs so it may come back after some volatility.

  1. Worst Case Scenario (Bank Nifty Opens 300-400 point up) - It may come down later, So I will have to wait. There will be no point exiting at such highs when chances of it coming down are high at such huge gapup. My positions are hedged.

  2. Expected Scenario (Bank Nifty opens near 25200) - It can also be the worst case scenario, if market slowly starts drifting up and continues to drift up like 10 October 2018. It migh come down from here too as I expected market to expire near 25000 levels. My bear call spreads will remain in profit if market drifts lower. My diagonal calender spread will also be in profit if market comes down to 25000.

  3. Best case scenario (Bank Nifty Open flats and stays below 25100) - Not likely today.

Since, my positions are hedged, a worst case scenario will give me a mark to mark loss of 15000 to 20000. Expected scenario will give me a loss of 10000-12000 and best case scenario will keep me in 10000 profit. These are volatile and desperate times.


I still have room to add 5 Lots. I might take a naked straddle today, given tomorrow is expiry but first focus is on managing open positions.


Rohit Katwal

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