26th Oct ’23 — Nifty hits the jackpot of 18880 — PostMortem on Nifty & BankNifty
Nifty Weekly Expiry Analysis
Nifty fell a whopping 765pts ~ 3.90% between the last expiry and today. Most importantly it has retraced all its gains from 28th June to close below 18880. We will cover why that is relevant below, but this fall of 4% signals a reversal in trend. Even though VIX is still below 12%, it is showing a tendency to spike, reassuring the bearish sentiment.
Nifty Today’s Analysis
Nifty50 was quite benevolent today, we set a target of 18880 and Nifty hit that by 10.55. That’s a first — 99 out of 100 days the strategy we set for days like these ends up worthless. A day like today will ensure that 1 day is good enough for the options to go deep in the money.
We had a gap down open of -86pts ~ 0.45% and from there we fell another 193pts ~ 1.02%. The final close was at 18857. The chart may not paint the severity of the move since its on a logarithmic scale — but trust me, the pain was much more. Except for AXIS, ITC and HCLTECH — the cuts were pretty steep for everything else.
On the 1hr chart, the intensity of the first candle is quite obvious. We took out 211 ~1.11% in the first hour itself. The remainder of the day was more or less sideways with a slight bearish intent.
On the daily TF, notice the orange color encircled regions. You can quickly relate what 3 white soldiers and 3 black crows are. Today’s closing ensures we retouched the new ATH set on 01 Dec 2022 & 19 Jun 2023. Further price action should be interesting as the global macros keep on deteriorating. For tomorrow, I wish to maintain my bearish stance and expect Nifty to trade between 18880 and 18762. If we break 18762, my next target would be 18597.
BankNifty Weekly Expiry Analysis
BankNifty had 1 extra in this week as the last expiry was on Wednesday. But the extra day was cut short as we had a scheduled holiday (Dussehra) in between. BankNifty did not fall as much as Nifty, it fell only 3.64% ~ 1597pts compared to 3.9% on Nifty. The premiums on the option strikes were not good enough except today. But I am quite sure BankNifty has already done its part by leading this trend reversal well ahead.
BankNifty Today Analysis
There were 2 interesting patterns in the chart today. Firstly we did not open as badly as Nifty, we were only 0.31% ~ 131pts gap-down. Secondly, the percentage fall on BankNifty was well below Nifty50 for most of the duration today.
After the gap-down open we fell another 599pts ~ 1.40% before gaining support and then retracing 262pts ~ 0.62%. Only between 11.10 to 11.45 the percent fall was much greater than Nifty50. What that means is BankNifty was showing reluctance to fall and even when it did — it managed to crawl back up. I am not suggesting a bottom is in place — but the bears are not as strong on BN as they are on N50.
A look at the daily chart will help you solve that confusion. The next marked support in my chart is 41624 which is 656pts below today’s closing. We might need a strong red candle to get there — this may help push the momentum for the bears. According to me the cuts in BankNifty has to exceed the cuts in Nifty more than the weightage it exerts — only then a strong downward trend will materialize.
If you look at the levels today, we have retouched the zones of 17 Apr 2023, 25 Jan 2023, 22 Dec 2022, 11 Nov 2022. When 42280 was first hit on 11/11/2022 — it was a new all-time high that day. I would like to maintain my bearish stance and expect BN to trade between 42576 and 41624 for tomorrow.