07 Jul ’23 Post Mortem on Nifty & BankNifty | Pump and Dump Scheme?
Its been a year I started blogging about BankNifty. From this quarter I decided to analyze the movements of Nifty50 also. I wish to open up a few of the strategic trades taken during the day as well along with the rationale.
Give more importance to the rationale rather than the trade so that you can learn from it. Also, I am posting the trades after the day has closed — meaning there is no point in copycatting the same with an intention to earn easy profits.
Since I am not a SEBI registered research analyst, I cannot provide research recommendations or trade recommendations. The analysis is just my version of what transpired during the day and it could even be biased based on my belief systems!
Nifty50 Analysis
Nifty hit an all time high of 19523.6 at 10.00 today, this was after we opened the gap down and then had a series of powerful green candles. The surge that took N50 higher was so special that if you looked at 10.00 AM you would never have thought of going short.
Opening gap down was due to the handout from the global markets & it was expected. but the 102pts rally to the ATH was unusual. I am quite sure the last of the bears would have exited the marketplace seeing the strength. Now when we look back, it seems like a classic pump and dump scheme!
Trades Taken
As soon as the N50 broke today’s low 10.45, I took a bearish credit spread i.e sell 19500 CE at 62.25 and buy 19600 CE at 32.85. The max profit on this trade is Rs1470, max loss is Rs3530 and Break even = 19529.4. The risk:reward = 2.4.
This is taken for the current weekly expiry and since its a credit strategy, the time decay will help it. If the market stays as it is or continues to go down the position will remain profitable. If the market scales back up to 19500 levels quickly, my position will start bleeding & I would have to start running for cover.
1hr TF
The indicator gave a sell signal by 12.15 only on the 1hr chart. Since the intraday is viewed at a lower time frame of 15mts & 5mts — the trade was taken early.
N50 is currently at the 3rd July close levels wherein there was a top like formation. If we continue to fall from here then the trades between 03 Jul to 07 Jul will look like a blip on a longer time frame. Having said that 19330 will form the first support/resistance zone (although not strong).
BankNifty Analysis
Banknifty was diverging with Nifty50 early in the day. When N50 was rallying till 10AM, BN was just holding ground unable to go up. The fall that followed was when both of them had correlation.
BN was showing weakness yesterday also, esp in the 14.05 to 15.10 move yesterday. Today BN after opening gap down could not even climb back to yesterday’s close level. 3 strong red candles at 10.40 to 10.50 really helped the bears today.
But there was a frustrating period where BN was not going down or up — just staying flat. i.e from 10.55 to 14.10. In fact the recovery from 14.05 to 14.55 of 192pts gave some additional momentum to push down the prices, we lost 242.95pts due to this.
1hr TF
Yesterday we discussed about a empty band formed due to the gap up on 03 Jul. The first priority for the bulls would be to defend the lower end of this band to push the prices up. Similarly if the bears can break the lower band with a gap down open on Monday, it will give them immense momentum.
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