23rd Oct ’23 — The perfect day to break 2 supports — PostMortem on Nifty & BankNifty
Nifty Analysis
Recap from yesterday: “Keeping the global macros in mind, I still wish to continue my bearish stance and expect the 19446 to be taken out on Monday and retest the 19310 soon.”
If you watched the opening minutes, you would not have guessed the 283+ intraday fall possibilities. We had a flat open instead of a gap-down even after a weak handout from US markets last Friday. The options data did not indicate any directional bias. Even India VIX fell to 9.68 by 10.00 indicating a collapse of 9.5%
The best evidence was India VIX which fell to a session low of 9.68 by 10.00, unbelievably down by 9.5%. I had 2 short positions on Nifty, long puts and short calls. I planned to unwind the short calls and get into the FinNifty options to take advantage of the expiry today. This plan was spoiled by the 10.00 AM red candle that prevented me from switching. What happened from there was simply magical.
By 11.40 we tested the first support of 19446 and by 13.30 we broke that. Honestly, I thought that’s how the day ends. The real party was just starting. Between 14.05 to close we fell a massive 180pts ~ 0.93% and took out the 19310 crucial support pretty easily.
On the 1hr chart, its more clear and loud. The 14.15 candle shaved off 165pts ~ 0.85% and the length of that candle does tell a story. Since that support is broken, it may pave the way for further downfall.
To prove this point, had to bring up the daily chart. See the encircled region, Nifty sent 3 white soldiers on 28th June to break out from the 18880 level. That helped it conquer 2 new ATHs on 20th July and 15th Sep. Since we are back at the 19310 levels, my point is — the next fall may be as deep as 18880 i.e 430pts ~ 2%. Nifty has no experience trading between these 2 zones earlier, so the supports should be equally powerless. I can mark the top of the candles as support zones, but they would be predictably weak (19190 & 18969). Since we have a holiday tomorrow (Dussehra) we may have to watch how SPX reacts for 2 days. If the Global macros improve, a brief relief rally above 19310 may be visible, but seeing the strength of the RED daily candle, I wish to continue my bearish stance.
BankNifty Analysis
BankNifty on the other hand had a gap up open, thanks to the excellent results from ICICI Bank. To a great extent, BankNifty resisted the down move on Nifty. Even till 13.55, it was only 0.17% below the previous close.
But right after that, it fell like a house of cards. Whatever support ICICI gave till then was undone. ICICI ended up closing negative 0.3%, remember that it stayed green till 14.55. An intraday swing of 2.06%.
BankNifty also broke 2 supports today, 43404 and 43253, both of them after 14.55. These supports offered no protection today, the momentum to cruise through was that strong. Fortunately, the 43012 support (3rd support) was held today.
On the daily time frame, BankNifty has already undone the 28th June adventure. We are now trading at levels seen in the first week of May. The next major support after 43012 comes at 42576 and then at 42130. Going by the depth of the red candle today — it is quite likely that we retest those levels quickly.