26 Jul ’23 Post Mortem on Nifty & BankNifty | A trend reversal in store?
Nifty Analysis
Today’s gap up opening and the race towards 19825 took out my stop loss. From last Friday we were short on Nifty, this stop loss hit proves to me that the bears are short lived in our market.
Nifty50 went up 147pts ~ 0.75% from the prev. close enough to take out the 19800 levels where I had placed the protective stop. The main reason for the rally was the boost in RIL, ITC and LT.
Until the high of the day was formed — NiftyIT was also supporting it. And at 11.15 NiftyIT started reversing whereas banknifty which was starting to fall reversed. The contra move in NiftyIT and BankNifty was like a script from a tamil movie (perfectly musical). The final effect was Nifty50 was able to hold its ground.
At around 11.30, I was not able to agree with the technicals and took a smaller position — bought 19600 PE @ 10.5. Now I have 2 opposite positions of long and short on Nifty50 carried forward to the expiry tomorrow. Most likely the PE position will expire worthless or I may have to convert it into a ratio spread.
The negation of the short-term bearish trend is visible + the island formation due to the gap up. If we get a mega gap down tomorrow, i.e. a quick fall below the 19650 levels — I will be more inclined to ride on the bear wave and consider today’s price action as a fake.
BankNifty Analysis
Banknifty on the other hand gave a trend reversal signal in just a day. For nifty we had atleast 3 days in succession. I took some short positions yesterday intraday and was all geared up to further attack by shorting more CALLS today.
The opening minutes looked encouraging, so did the period from 10.35 to 11.15 but 2 things went against it.
- The options data showed lack of interest in creating CE credit spreads i.e shorting near ATM call option and buying a far away OTM option.
- Banknifty started to rally and take the place of NiftyIT which reversed from its intraday high.
It was like 2 brothers who came prepared from evening to support their sister, when one brother got tired, the other one jumped in. In our case the BankNifty brother did more than just support — it rallied an impressive 252pts ~ 0.55% up till 14.30.
The short trade negation came in banknifty only after the 46000 got taken out. Let us see how the expiry day is getting played out tomorrow because as it stands the options premium in banknifty looks pretty low. The India VIX staying in the 10 range is also a discouragement for the bears that are still left.
Free charts made with ❤️ on TradingView
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