Analysis and Trade Plan - 27 January 2020
Nifty Future (End of day and Intraday Analysis)
Its last week of January 2020 and we are nowhere again. 12200 has been the center point of market for 3 months now. Open interest is at historical lows on Nifty which reflects the big money is not pouring in. January has been a sideways month with volatile movement to both sides. We are stuck in a range of 11800 - 12400 and post budget there can be a direction. Till that we can touch all time high yet again.
On Friday, I mentioned that market is sideways. I have been following alligator for long time. And whenever in an existing trend, jaws of alligator are crossed, symbol enters into sideways market with bursts to both sides. Hence on Friday, despite being bullish on smaller time frame, I declared we are sideways. See the circles:
I also mentioned about divergence being played out and it played out well. We are again towards testing the upper trend line of RSI. I think it will be tested, but breaking is another story.
Money Flow Index which is basically volume weighted RSI has suddenly turned up and is almost near breaking the trendline.
MACD is also inline with RSI. Divergence is being tested. Long positions can be initiated once the trendline is broken.
Coming back to intraday charts, sellers were in control when Nifty was below 12200. On 23rd January it was tested and now bulls are in control. On 24 Jan morning, bulls have gain control and as long as 12230 on Nifty future is intact, we can assume that trend is going to remain bullish.
Alligator on lower time frame is bullish now.
RSI is also getting bullish on lower time frame:
If we come back to data analysis, on 24th January, there was long buildup on Nifty Futures.
Max pain has again moved up to 12250 from 12150 to 12250 levels.
On 23rd Jan 2020, total 36 lakh puts were written. On 24th Jan 2020 again 35 lakh puts were written while 35 lakh calls were unwinded. 12200 calls shed the most and 12150/12200/12250 witnessed heavy writing. Max puts were written at 12200 level and max calls were written at 12350 level.
To draw a conclusion, we are trading with bullish bias. This view can negate if Nifty future closes below 12200 on closing basis. At around 12350-12400 I will be cautious on how the daily charts are evolving.
Bank Nifty future (End of day and Intraday Analysis)
Bank Nifty is weaker as compared to Nifty. Fall that started on 17 Jan 2020 was genuine with short buildup and for last two days we witnessed short covering and no fresh buildup yet. Support at 31000 was tested and Bank Nifty quickly bounced from long time horizontal support for now. Alligator for Bank Nifty has started to turn bearish now. If we are indeed bearish than price can reverse from 31700 levels. Considering these 2 factors where in we had found support at horizontal lines, trend is bearish so going to remain sideways for some days, I wrote 32100 call and 30500 put.
RSI setup on daily charts is already bearish as it is hovering below 50 levels. A technical retrace can test 31700 levels which also is a reversing point from alligator for now.
With bearish move on 17 Jan 2020, we saw the Bollinger Band bottom being pierced and for a day price continued its drift to downside before bouncing again. Along with MACD, BB is in downward slope now.
Coming to intraday charts, bears were in control when price was below 31050. In last two trading sessions, 31300 is the new point of control above which bulls can take charge. Rally on Bank Nifty is not as strong compared to Nifty.
Alligator is also bullish with support between 31200-31300 levels. For all bullish positions 31230 should be a stoploss. Below 31000 one should not stay bullish.
Coming back to data analysis, 31000, 31100, 31200, 31300 puts saw good put writing with max puts written at 31000 level. On calls side, considerable calls were written at 31700-31800 levels. I am talking about the numbers that matter.
Total calls were written to the tune of 6 lakh where as puts were written to the tune of 20 lakh.
It is safe to conclude that we are bullish till expiry with resistance coming at 31700 levels where we might need to reassess what future holds. I will keep a stoploss for long positions at 31200-31300 levels with no bullish bias below 31000.
PS- This is just a view formation. Executing a strategy is a whole different story. Follow at your own risk, Its for educational purpose.