Analysis and Trade Plan - 14 May 2019

  • I said yesterday that US China trade war was bad. Why did Dow Jones ended 114 point up was a mystery and we needed to wait to see what was truly happening. Yesterday Dow Jones fell 614 points or 2.4%.

  • Hang Sang is also down 1.84%.

  • Yesterday SGX Nifty was down 90 points, now it is only down 40 points. As an option writer, it is again a catch 22 situation for me.

  • I am expecting a gap down but also a sudden rise after that.

  • Ideal thing for me would be to square off all positions as soon as market opens gap down or wait for a level to be put as stoploss to lock in profits.

  • We also have to be prepared that whatever fall had to come, already came yesterday and today market may start moving up without going down. There is really no proof to it whether we follow Dow Jones or Dow Jones follow us.

  • My first basic rule of trading is not to catch a falling knife, so buying right now is not an option.

  • India Vix at 27.38 is pretty high and analysts expect it to touch 30+ before elections. High Vix is always akin to sellers market.

  • Rupee fell to 70.50 levels due to equity market routs and can even touch 71.80 in coming days.

  • For Nifty, PCR at 0.49 and Bank Nifty, PCR at 0.45 is extremely bearish. Even the immediate 10 calls or puts cumulative PCR is around .40 for both the index.

  • There is not much activity in index futures right now.

  • In previous bear rallies till now, max pain used to be steady. This time even max pain has started to move down for Nifty and Bank Nifty.

  • I expect this blood bath to pause around 11050 and 29400 for Nifty and Bank Nifty.

  • I am trading with bearish bias right now.

  • Today, if we form an indecisive candle or a sideways day, I might look for sideways day ahead. In that case my preference will be to execute Strangles till expiry for far away strikes with reduced profit margin, giving away cushion for volatility.

Here are my overall positions:

4 May 2019 - 16 May 2019.xlsx


Rohit Katwal

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