16th Oct ’23 — Flattish Day with no flavor — PostMortem on Nifty & BankNifty
Nifty Analysis
We started the day with a strong red candle, maybe the spillover effect as SPX had closed with a cut of 0.5% on Friday. We did not fall below 19614 so there was no question of going short. Interestingly we recovered 89pts by 11.45 and was trading with a tint of green. Markets were absolutely flat with no flavor, people who had deployed directional strategies would have felt asleep seeing the price action. Traders who went with non-directional strategies like the iron condor, iron fly or straddles/strangles would have hit the jackpot.
In the last hour, we gave away 50pts — but nothing to worry about. Our VIX ended the day with 11.07 whereas US VIX is still at 17.61 even after a 9% collapse after SPX went green today. Lower VIX in Indian markets reflects the lack of fear or uncertainties — reiterating that it is a pathetic period to sell options thinking you can collect whatever premium is available. Selling low is not a good strategy — it is better to wait out or take a vacation if you are that impulsive.
On the 1hr chart, I wish to maintain the neutral stance until we break out or break down. Since we are near the resistance level, the probability of breaking out could be higher. That does not mean we jump the gun and take the trade early — patience is gold. I personally prefer to see a fall and retest of the 19446 levels by this Thursday — that is the only way I know to drive up the VIX.
BankNifty Analysis
BankNifty’s trade today looked quite different from Nifty50. The opening candle was a stronger red and we retested the 44068 support. Since we did not break it — my short call did not trigger. The rejection took BN higher by 312pts ~ 0.71% and we went into the green territory for a brief period.
And even after all these — the options data was absolutely lackluster. Absolutely no premiums — the best trade again was to wait it out. We all knew HDFC Bank would come with its results today — still, the volatility was not really there. Recommend you to read this tweet by Deepak Shenoy wherein he has compared the results pre and post-merger. Most retail traders may be blinded to believing there was a 50% rise in Net Profits. The reality is quite different.
On the 1hr TF we have a double top overlooking a newly formed double bottom (just below support). Although the W shape is not that beautiful — the lack of ability to break the support puts its weight behind it. Today also we had a reversal from support. I still prefer to go with a neutral stance till we get more clarity. 100% sure that HDFCBK’s results will skew the price action tomorrow — I still prefer to wait for the dust to settle.