Welcome to Monday morning.
Since November Expiry on 29/11/2018, NIFTY is struggling to find a direction. It made small up moves followed by two days of big declines. On Friday, it gained 92 points in volatile trading.
With all those moves it has lost 165 points over 6 trading days.
Our trades too have done reasonably well with best performance by SUNPHARMA PUT 450.
Today on Monday morning the markets have to deal with:
(1) US Market down move on Friday as reflected here:
(2) Exit Polls for State Assembly Elections:
Predictions by various Exit Polls have not been good for the BJP. Most of the polls have predicted major gains for Congress Party. Agreed that these are exit polls which are just pointers to the likely outcome but if the results are in line with these predictions, markets are in for turbulent times.
We may see the negative trend for 2-3 days this week unless Global Markets recover sharply.
(3) Crude Oil Price recovered very sharply on Friday. That coupled with other two factors is a further dampener for the markets.
Markets have been known to make fools of all the experts at most time and may do nothing of the sort we expect. Still we have to make some judgement calls based on the known facts and the facts are not so encouraging.
What Do We Do Now ? :
We are mostly in PUT trades except one CALL in TITAN. So we stay put in the PUTS.
RELCAPITAL and TATAMOTORS had made 52 week lows on Friday when the market was strong. Further weakness is expected from these stocks if the overall trend is weak.
SUNPHARMA is proving to be a bitter pill for the bulls and right prescription for the bears. It is tantalizingly close to the 52 week low of Rs. 401.50 made last week and we may see a move below Rs. 400 very soon. However, it will be prudent to cash out some profits by exiting PUT 450 and moving to lower strike. I have already moved to PUT 380. Let us see how the trade works out.
Then we have TATASTEEL. It had touched Rs. 501 on Thursday and then recovered to Rs. 521. Could not stay at higher level and did not gain even with 92 point gain in NIFTY on Friday. We look for it to breach the 52 week low of Rs. 493.
Let INFY and TITAN do their thing.
If the NIFTY decline really happens, it may turn out to be a good day.
This is what SGX NIFTY looks like as I write:
New Trades :
RELINFRA did not work out for us in November Expiry. It was profitable at one stage but ultimately ended worthless. It is meeting all the criteria for taking a trade. It is down in 30 day period as well as in 7 day period. Options have IV of near 60 and reasonable volumes are traded.
In view of the uncertainty prevailing in the market any trade is going to be a difficult trade.
I would go for PUT 280 ( current price is Rs. 307.90) at a price between Rs. 7.00-8.00. If not possible to enter in this price range, I am not losing sleep over it. Maximum risk in case the trade is taken would be Rs. 10400 as the lot size is 1300.
Trade cautiously, trade profitably.
Disclaimer: This post and examples are for teaching purpose only and are not meant as advice/suggestion to trade in these stocks. Trading in Futures and Options can lead to big losses and should be done with appropriate knowledge and advice only. Mentioning the stocks here does not imply that I have a trading position or likely to take a trade in these stocks.