Analysis and Trade Plan - 3 March 2020

After busy and tiring few months, I am starting writing my analysis once again.

  • Yesterday we had a 390 point swing on Nifty and 1000 point swing on Bank Nifty.

  • With Covid-19 virus, we have entered a bear phase after 4 months of consolidation.

  • Previous support of Nifty lies at 10800-11000 level and for Bank Nifty at 27500-28000. So that is where I expect this rally to end.

  • India Vix has touched highs of 25.20 so there will be a lot of volatility on the way down. There are talks of dead cat bounce but understand that cases of virus have just started to emerge and till the vaccination is found we cannot hope for a reversal.

  • At this time, there is no technical or data analysis system that can predict an exact entry or exit. One can keep a look at India Vix. Whenever there is a drop by 20% on India Vix, can be a signal that a bottom is in place.

  • There is a gap of 100 point at 11400-11500 level which will act as a strong resistance for time being.

  • Bank Nifty has also a gap of 300 points at 29700-30000 which will act as a resistance.

  • As an Index, Nifty usually forms a base below 200 DMA which is at 11700 and 30000. So one should be cautious going further short at these levels. We may not go up in V-up fashion and might consolidate a bit here.

  • RSI is below 30 on daily charts which suggests that Nifty and Bank Nifty is oversold. Instruments can remain oversold for a greater time.

  • Going by pure technicals, Nifty can start forming a base around 10900-11000 levels with volatility to either sides. Bank Nifty has just started its journey towards 27500-28000 levels. Nifty was much aggressive to downside than Bank Nifty. I think Nifty can go little sideways to bearish where as Bank Nifty might gain pace to downside.

  • Yesterday, DJIA closed 5% up on the hopes of rate cut by federal bank. Its speculation but it may have an effect on our market. How much up we can go is not known.

  • INR is trading above a long time resistance of 72.5 which may put pressure on Indian Markets.

  • Max calls are written on Nifty at 11500 and yesterday max calls were written at 11400. Max puts are written at 11000 with maximum writing on 11100. General volumes have gone down suggesting low activity due to hightened risk perception.

  • PCR is at 0.79 which is not highly bearish.

  • Max Pain for Nifty is at 11400.

  • For Bank Nifty, max calls are written at 30000 and puts at 28500 with 29900 calls an d 28100 puts written aggressively yesterday.

  • Given the global circumstances and weighing in everything, we are in a very dangerous time. Trend is bearish and with high vix, we can expect highly volatile moves. I suggest option writers to tread with caution. Keep an iron clad hedge to positions, know when to exit and keep safe distance. Premium is very high so it should not be a problem.

Rohit Katwal

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