Analysis and Trade Plan - 12 May 2020
Technically, both the indices are weak and any momentum to upside is not visible. Involvement of smart money is minimum. Bank Nifty appears much weaker than Nifty.
On 30 April 2020, we had huge long buildup on Nifty. COI rose by 17 lakh and till date we are witnessing long unwinding. Whatever positions were created to long side are all covered.
Max Pain has been hovering around 9300 on weekly and 9500 on monthly options. Breakout is being buildup. It's a matter of when. For Bank Nifty, max pain is moving down and currently at 19500.
Since 30 April 2020, PCR is constantly bearish for Nifty and Bank Nifty.
Range for Nifty was 240 points yesterday. 9200 is crucial this week followed by 9000 put options. Calls of 9300 and 9400 are crucial for any upside. I am keeping an immediate watch on 9200 put and 9300 calls. Option activity of 11 May 2020 was not the one of strength. Call writers were active at 9600/9800 strikes which are far. ATM options witnessed equal strength.
Monthly options are also giving a sideways movement.
Bank Nifty is Level 1 Bearish on weekly options. It is slightly bearish as of now.
Price action of 12 May 2020 can give further clue whether this weakness will increase, or we may see a reversal.
Conclusion: We are sideways to bearish but lacking strength. Be wary of a strong reversal/trend continuation.