Analysis and Trade Plan - 3 February 2020
With budget 2020 we have finally broken the tight range that we were trading in for last 3 months. Things will be much clearer now and even if its bear market, certainty will be there.
The big shot of Corporate Tax Rate cut was already given by FM, so there was not much that could have been done in this Budget.
I will probably trade in second half of Monday. Due to increase spread of corona virus and delayed opening of Chinese market, there will be volatility. I want to market digest it and then trade. I am not a volatility trader.
There is no clue of what might happen on Daily Charts beyond a bearish outlook ahead. May be it is the start of the broader correction.
On 30 minute charts, selling started on Nifty on 27 January and the sellers are controlling the market till 12000. For selling of February, 11900 is the point of control. And on budget day, 11760 remained point of control of sellers. These levels are going to remain crucial on how we tread now. Any uptrend will come only when closing above 12000 happens and sustains.
11850-11900 is also the last support which should now act as resistance.
Not to confuse but there are two possibilities:
1. We can bounce till 11850-11900 levels on monday which can be a good opportunity to short. Closing above 12000 seems distant right now.
2. We can have another bearish day wherein yesterdays low might be broken and we may see a little sideways movement or bounce post that. It will be a dead cat bounce.
Max calls are being written at 12000 and max puts are written at 11500. Calls are heavily written given the bearishness. This should act as trading zone till first week of February. Also worth noting is that 12000 put still has the max OI on monthly charts. It is possible that straddles are being created at those levels. Which has a literal range of 500 points. So it will be worth keeping an eye on 12000 straddle when 11500 is broken.
Bank Nifty was already bearish before Nifty. Bounce is expected till 30300-30600 as that is the point of control of bears on daily charts and post budget.
Max OI is written at 31000 and 29000 which appears to be the range for this week on Bank Nifty.
To conclude, we are bearish. If we bounce tomorrow till 11850-11900 / 30500-30800, then its time to take some bearish positions. If we fall more than we must expect bounce and write some hedged put accordingly at safe distance. Rohit Katwal
PS - Near point of control on 30 minute charts, I use 5 minute charts to continue the break in expected direction to take position. Its not like as soon as the levels are hit and I will go bearish. Its a wait and watch game with resources ready to deploy at right time.