07 Aug ’23 Post Mortem on Nifty & BankNifty | Change in sentiment from neutral to bullish
Nifty Analysis
On Friday 4th Aug Nifty made a gap up opening and created an island day. We had changed the stance from bearish to neutral. And today nifty managed to build-up momentum on top of what happened on Friday, to me — that’s bullish.
After opening gap, nifty managed to stay above the 19530 level quite strongly. At 09.30 nifty made the low of 19524 and then went back to 19585 level. Imagine the bears could not even push Nifty to the prior day’s close values. This was even after not getting real support from banknifty.
From 10.50 to 12.25 Nifty stayed range bound and was not indicating a real directional move as the options data was suggesting low volatility in spite of India VIX shooting 5%. But Nifty managed to get a rally going and by 13.40 we hit the high of the day ~ 19620. Once it broke past the 19600 level — I had to change the stance from neutral to bullish. The major strength for Nifty was the NiftyIT & NiftyPharma sectors.
On the 1hr TF Nifty has managed to reach the bearish trend line, and many may think that my stance change is too early. What I personally feel is, its better to play the long side right now and reverse the stance if we have a rejection from the descending trend line.
BankNifty Analysis
Banknifty had a perfect flat range bound day today. Normally we dont see it that often, but banknifty seems like a tamed beast as of now. You might be bored to hear this from me again that from “January 2023, I think banknifty is less volatile than Nifty50”. A look at the options data is ample proof — the OTM option values today is more like we usually see on a wednesday.
All non-directional traders who deployed straddle, strangles or iron condor/fly would have made some easy money as there was no breakout or breakdown.
Just like the stance changed on Nifty from neutral to bullish, I preferred to change the stance on banknifty to neutral from bearish. Here again it is much early as we had no decisive break of the recent H&S nor the trendline. But today’s price action has influenced my decision — the bulls and bears are currently equally powered and it looks like both of them do not want to pick a fight now.
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