Hello guys, How’s your trading going? Hope you are following the updates we shared in my last weekly analysis option strategy post.
From last few weeks, I’m Saying that sentiments are weak, and we should hold our positions with a proper hedge. This week we saw a sharp decline in both the indexes. Nifty & Bank Nifty both are trading below their crucial support levels. Sentiments are weak globally as well as domestic too. US-China trade war is going big day by day. There are a lot more uncertainties in the global market, which is creating pressure on the Indian market too.
On the domestic front, Nifty PE trading around 27, indicating very high valuation in the Indian market. I was looking at FIIs data, see what I found
FIIs sold around 12000 Cr equity in July alone, which is the highest number for this calendar year. Selling by FIIs is also the main reason for this continuous downside moments. Although DIIs are buying but how long they can support the market, this needs to be watched.
Let’s look at the charts:
Nifty Chart this week:
If you look at the Nifty chart, you will find that 11000 (which was the crucial support level on the Nifty Chart nifty) broke in just one trading session. This indicates how weak sentiments are nowadays. There is no indication for any recovery neither in strength nor in momentum on the nifty chart.
RSI & MACD both are giving clear downside indication on the nifty chart. 100 & 200 Day simple moving average both are already broken. As I told you in my previous weekly analysis and option strategy post that
Upside is locked but downside is fully open, So diversify your portfolio and keep it with proper hedge.
Large Caps stock, which was the top gainer last year, have started their downside journey. Small Caps & Midcaps already down so much. It should be an excellent opportunity to buy good quality stock on cheap valuations. So focus more on a strong portfolio for your long term goals.
Now, If Nifty manages to sustain below 11000 levels, the next targets should be 10600 & 10200. On the Upperside, we can’t expect any upside rally until Nifty is trading below its 200 DSMA which is at 11150 based on the current nifty chart.
Open Interest Analysis:
Based on option chain data, the highest public interest stands at 11000 CE & 10800 PE, followed by 11200 CE & 10500 PE. PCR of all strikes is 0.65, which is a neutral zone. PCR at 10500 stands at 9.1, which is acting as an immediate support level, PCR at 11200 stands at 0.32, which is acting as a resistance level. Equally, substantial indicator Option Pain is at 11000, indicating weekly expiry at 11000. A shift in option pain will provide further levels.
Based on the Option chain data, Resistance levels are 11100 & 11200, and Support levels are 10700 & 10500. So the expected range based on current data should be 11200 – 10500. There is substantial open interest buildup around 11000 CE & 10900 CE, intense indication pressure on upside levels as per current data. As Nifty is looking supper bearish, so Need to track closely for any further shift in range as per option chain analysis.
I’ll track the open interest, and if there is any change, I will share it on my blog. So keep monitoring and subscribe to our email list to get the latest updates.
Weekly Option Strategy: Modified Butterfly
Possible adjustments: Not required.
BankNifty weekly analysis and option strategy:
We saw a sharp selling in most of the PSU bank which drags BankNifty to its 200 DSMA. You can see that Bank nifty is trading below to its 200 DSMA, which is not a good sign.
If we look at the Fibonacci tool, 50% – 65.8% is the retracement zone, which is at 28000 – 27150. If Bank nifty manage to hold this range, we can expect some recovery from here. Below 27000 we’ll see more downside movement.
The trend is complete downtrend. RSI & MACD both are showing weakness. There is no sign of recovery based on current data.
BankNifty Open Interest Analysis:
Based on option chain data, the highest open interest stands at 29000 CE & 28000 PE followed by 28500 CE & 27500 PE. PCR of all strikes stands at 0.70, which is a neutral zone. PCR at 28000 stands at 3.57, which is acting an immediate support zone. PCR at 28400 stands at 0.18, which is acting as an immediate resistance zone. Option pain stands at 28200, giving us expiry level. Keep tracking this option pain level. A shift in option pain will provide a new standard for expiry.
Bank Nifty Weekly Option Strategy: Call Ladder Spread
Note: Its unlimited risk strategy, required proper tracking and timely adjustments. So do not initiate if you don’t know how to manage it.
Possible adjustments: Loss will start above 28700. So once bank nifty hit 28400, buy a 28600 CE & hold rest position as it is.
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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.