Weekly Analysis and Option Strategy for 8th – 12th July 2019

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Hello Friend, Hope you are doing in your trading. This week expiry was very good for Option Writers, Market Consolidate in a range which we shared in our last Weekly Analysis and Option Strategy post. On Friday our finance minister has delivered Union Budget 2019.

Key takeaways from Budget speech:

Agriculture:

  • Need to replicate Zero Budget Farming Model.
  • Govt to invest widely in agriculture infrastructure.

Finance & Banking:

  • For purchase of high rated pooled assets of NBFCs, Govt. will provide 1 time 6 month partial credit guarantee to PSBs for loss upto 10%.
  • Govt. to provide Rs 70,000 Crore capital to Public sector Banks.

Tax Reforms:

  • Surcharge Charges increased by 3% for those earning Rs 2-5 Crore and above 5 crores.
  • Those who don’t have pan card can file IT return by quoting Aadhar Number.
  • Annual Turnover limit for 25% Corp Tax raised to 400 Cr from Rs. 250 Cr.

Investment and Market:

  • Investment by FIIs and FDIs in debt securities in infra debt funds to be allowed.
  • A social stock exchange to be set for social and voluntary organizations to raise capital.
  • 100% FDI for insurance intermediaries. Local surcharging norms to be eased for FDI in Single-brand retail.
  • Limit on FPI in a company increased to 24%

Railways:

  •  and Railways Infrastructure would need an investment of Rs. 50 lakh crore between 2018 and 2030.
  • PPP to be used to unleash faster development and delivery of passenger freight services.
  • Railway Station Modernization program to be launched.

Automobile:

  • FAME Scheme Phase-2 commenced.
  • Custom duty exemption on certain e-vehicle parts.
  • Income tax deduction of interest on loans for e-vehicle purchase.

Defence:

  • Overall defence budget increased by 6% to rs 4.72 lakh crore.
  • Defence capital procurement has been hiked by 10% to Rs. 1.03 lakh crore.

Over all this is a balanced budget. Some more announces  also there like reduction in STT in Option Trading. The Non Banking Financial Companies sector has been under stress since the default by some IL&FS group. This Budget has tried to provide a short term boost with some structural changes.

Nifty Trend this week:

Nifty Weekly Analysis
  • Like I Shared in my last Weekly Analysis with Option Strategy that 11760 – 11910 is the reversal zone based on Fibonacci extension tool.
  • On Wednesday and Thursday Nifty tried to sustain above 11910 but Friday’s fall took all its weekly gain and closed at 11811.15.
  • Nifty correct almost 200 points from its higher levels on Friday. Is it a sign of weakness?
  • Now 11756 – 11604 would be its strong support zone. This zone must be hold for its upside journey breakout will lead to further lower levels.
  • There is a Gap between 11615-11415, which is still open and Nifty would try to fill this gap before its new upside journey. So keep this gap on your radar.
  • RSI & MACD both are showing weakness. So can we expect some more downside from here? Interesting to watch.
  • Overall Trend is still UP until Nifty is holding 11400 – 111000. This 300 point range will be make or break for short to medium term trend.

Open Interest Analysis:

  • Based on option chain data, the highest open interest stands at 12000 CE & 11700 PE followed by 12100 CE & 11900 PE. PCR of all strikes is 0.48 which is a oversold zone. PCR at 11700 stands at 7.11 which is acting as an immediate support level, PCR at 11900 stands at 0.41 which is acting as an immediate resistance level. Equally, important indicator Option Pain is at 11900, indicating expiry at 11900. A shift in option pain will provide further levels.
  • Today we saw huge open Interest buildup around 24 lakh at 12000 CE, around 15 lakh at 12100 CE with 14 lakh at 11900 CE, which is indicating a strong resistance around 12000 level and market participants don’t expect much higher side in Nifty.
  • Here one thing we need to notice that Upside is locked but downside is fully open, as i told in my previous Weekly Analysis and Option Strategy post, Keep your positions with proper hedge.

Nifty Option Strategy : Iron Condor

Nifty Option Strategy

Possible adjustments: breakout from 11960 shift Put Spread to 100 points up. Breakdown from 11745, shift call spread to 100 points lower levels.

Bank Nifty Trend this week:

Bank Nifty Chart
  • I shared in my Last Weekly Analysis and Option Strategy post that 31000-30500 is a very strong support zone and I’m expecting Bank Nifty should hold this.
  • This entire week Bank Nifty was holding 31150 and Still Holding after the Budget Speech.
  • There is no sign of weakness. RSI & MACD also giving positive signal.
  • Now 31600-31800 should be Make or Break zone for Bank Nifty, if BankNifty manage to sustain above this zone then only we can expect some higher levels.
  • On the lower side, I’m keeping 30650-30150 as a strong support zone which need to be hold.
  • We should not forget about the GAP at 30072-29480, BankNifty would try to fill this GAP before starting a new Upside rally.
  • Right now we are sitting with no signal zone. At current level, neither a buy signal is coming nor a sell signal. We should wait for a breakout or a breakdown.
  • Range bound trading should be advisable. Keep your risk on limited side and let the market do whatever he wants to do.

BankNifty Open Interest Analysis:

  • Based on Bank Nifty option chain data, the highest open interest stands at 32000 CE & 31000 PE followed by 31500 CE & 30500 PE. PCR of all strikes stands at 0.69 which is a neutral zone. PCR at 31400 stands at 2.46, which is acting an immediate support zone. PCR at 31600 stands at 0.30 which is acting as an immediate resistance zone. Option pain stands at 31500, giving us expiry level. Keep tracking this option pain levels. Shift in option pain will give us new level for expiry.

Bank Nifty Weekly Strategy : Iron Butterfly

Bank Nifty Option Strategy

Adjustments not required for this strategy. Just book loss and close this strategy once it breaches break even points. If you still want to do some adjustments just shift Call spread to 200 points down after a breakdown from 31200. Keep put spread as it is. Same thing you can do with put spread after a successful breakout from 31800

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DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods.  This information should only be used by investors and traders who are aware of the risk inherent in securities trading.

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