08 Feb ’24 — Nifty Disappoints, stance reversed to neutral — Nifty & BankNifty PostMortem Analysis
Nifty Analysis — Stance Neutral ➡️
Recap from yesterday: “Our stance for tomorrow is bullish and since these are all games of probabilities we reserve the right to be wrong as would like to keep the 21826 area as a good stop loss.”
Just when we thought things were swinging in our favor, Nifty took a U-turn and is now back in neutral territory. “Disappointing” is not the right word to define today’s price action, after all the markets did what it felt right. Our analysis and positioning are what took the toll today. I ended up booking the highest intraday loss ever since I started trading. To give you a backdrop, we were long overnight and the set-up looked pretty bullish for us. Although we cut losses once the 21826 magic level got hit, our MTM was too deep in the RED for any sort of recovery.
Nifty fell a total of 346 points in the intraday trade today. The support level of 21913 was taken out with so much force (depth of the RED candle) that it felt like kissing goodbyes to this level. The culprit was BankNifty, after the RBI MPC meeting today, despite no major policy decisions — banks started falling, pulling the other stocks along with it. One thing that stood out in the discussion today was the instruction to include the loan processing fees, and other charges to the interest component so that the end customer knows the exact rate he is paying. Why would the bigger banks get spooked by that? Other stocks like NESTLE and ITC were looking weak even before the Governor’s speech.
Between the last expiry and today, Nifty has gained only 70pts ~ 0.32%. The gains would have been sizeable and meaningful if not for the rout today. After today’s episode, we drew the double top pattern (M pattern). Since the support level of 21913 is breached, we hope that this pattern holds. Nifty is by no means bearish, unlike BankNifty which slipped into the RED today. If BN continues the southward journey tomorrow, most likely N50 will have to follow suit.
BankNifty Analysis — Stance Bearish⬇️
You might be thinking about what kind of traders we are — yesterday we were all on the long side and today we are on the short side. I would say — the right kind. That is because traders are the only people who have to change their opinion faster than the lightning when the market reverses. If we keep our egos unchecked and do not accept our mistakes — the markets will wipe us out. So it is better to take the loss and switch sides and play along.
BankNifty fell an astounding 1288pts ~ 2.79% intraday, from a top of 46181 to a low of 44893 the chart was bleeding in deep RED. The two 4mts candles at 10:55 (-209pts), and 10:59 (-264pts) took out real meat from the gains made by BN from 31st Jan. And it landed right at the support area which made the breach obvious. Although BN had a sideways action till 14.19 — the fall was more or less certain. We waited out and changed the status to bearish only once the support got breached in the 16mts chart. We had also sent an email via TradingView Minds indicating our rationale.
The next logical support is at 44542, before we go there the markets might just re-evaluate why it broke the 45399 in the first place. If the big boys were onto something after listening to the RBI Governor’s MPC minutes today, we might be able to form a base case soon. In a single day, BN wiped out the gains made in the last 1 week — sometimes the markets can be quite brutal. Since we have changed the stance to bearish now — we hope we do not whipsaw here but continue on the downward journey for quite some time.
Algo Trading
Our BankNifty algo trades ended today with a loss of -2876 rupees. The Algo recovered from a swing low of 4106 after the 10.20 to 11.20 sharp fall.
· Intraday Algos run via AlgoTest on Kotak
· Webhooks automation run via TradingView on Dhan