Elections results are done and dusted. BJP did not do well. Political semantics about a good fight etc apart, it is a fact that the party lost the three big states it was ruling and did not make any inroads in Telangana despite the big bluster.
This loss of power can lead to a rethink of economy and government can chose to go populist before the General Elections in 5 months time.
Well, we are not here to discuss the economy. Yesterday the market perfectly did what it always does. Taken everything in its stride and moved on.
Urjit Patel resigns.
BJP losing the three states.
When the rumor becomes the news ( in this case the Exit Polls outcome) , markets just moves on. Whatever action is expected was already done. Didn’t we get a 205 points drop a day earlier out of nowhere? It was time to move up. Sadly it damaged our positions considerably.
The green tick of 60 points did not come about easily. In the early trades, NIFTY fell to below 10350. Then recovered in a slow and uncertain manner.
On Friday, NIFTY was up 92 points. Lost 205 points on Monday and gained 60 points yesterday. Still uncertain which way it will go.
Yesterday SUNPHARMA, RELCAPITAL, TATAMOTORS, VEDL, TATASTEEL made the new 52 week lows. Then all of them recovered from those lows and SUNPHARMA and RELCAPITAL turned positive in a big way. Not good news for us.
TITAN too recovered sharply and our only CALL for this month recovered some of the loss.
These movements combined with the fact that now election results are actually done and dusted, option premiums came down in a big way. That was additional loss for us. These are the ways markets work and we just have to bear with this.
We are still in with a profitable position though not as good as a day earlier.
Normally, I would be concerned but not much at this time. With 5 of the stocks making new 52 week lows, I expect at least 2-3 of them to revisit these levels and even breach them over next few days. That should make up for the profit given away yesterday. There shall be more trades in the days ahead. From now on it should be a normal month with lesser volatility but our stocks are inherently volatile. We shall either derive benefit from this fact or else we know what can happen in the worst case.
New Trade :
M&M ( Mahindra and Mahindra) is down 7.5% over 30 day period. It is flat over 7 day period. Normally we should not be taking a trade. But the fact remains that it made a fresh 52 week low yesterday at Rs. 694.
We still have 11 trading days to expiry and a simple 5% fall from the current price can take it to Rs. 690 levels.
Yes, there is some risk in the trade but which trade is not risky?
I will go for PUT 700 in a price range of Rs.9.00-10.00.
Maximum risk is Rs. 10000. ( Lot Size 1000 )
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.
Ravi kumar December 12, 2018 at 10:14 am
Strange are the ways of Market…Yesterday Experts’ views got a solid kicking in their ass! 😀Reply
admin December 12, 2018 at 10:18 am
Experts got the kick on the backside is fine. Problem is that we too are getting it.Reply
dev December 12, 2018 at 11:02 am
Tharik December 12, 2018 at 12:11 pm
Looks like all the 52 Week low stocks are in short covering mode. Couldn’t find any such stocks declining further except one or twoReply
vishal agarwal December 12, 2018 at 12:32 pm
that is correct plus vix has dropped significantly after elections. That is a double whammy.Reply
admin December 12, 2018 at 2:50 pm
NIFTY up more than 160 points. We expect the PUTS to go wrong. But TITAN CALL too is not performing. TITAN has chosen the day to not perform. We have seen such situations earlier and faced the kind of heat. Let us see whether we are able to bake the cake or burn our fingers this time.Reply
Manas December 12, 2018 at 2:13 pm
I’m sorry but you need to close TITAN, TATAMOTORS, TATASTEEL, VEDL at the earliest. They must be in red alreadyReply
admin December 12, 2018 at 2:46 pm
I agree that today is a bad day. It looks worse because we were in good position earlier. Getting in and out of trades at every reversal is what most traders do. And we know that most traders do not make money. They only do lot of trading. When we enter a trade, it is with full knowledge that it can become zero. Why second thoughts or second guesses?Reply
Trades could have gone wrong right from the first day. What would we do then? Wait. Why we can’t wait now?
Every trader has to deal with this situation on almost daily basis.
Stick to your rules even when circumstances are difficult. If one bad day can make the trades go wrong, one good day can turn them around.
Of course, you are fully entitled to your views and they may be profitable this time. But our aim is to have a method and follow it.
Devendra December 12, 2018 at 3:33 pm
I have been trading for so many years. This is the most simplest and effective technique I’ve learned on this blog. You take the trade knowing your risk before initiating the trade and rest you leave on the market participants. Beauty of this technique is you don’t need to look at market constantly. Once in while checking performance and do some adjustments of strick prices when you are in huge profit. That’s all.
Weak stock is weak and Strong one is strong. FullStop !
Rest is up to the market. We need to respect market and take what it’s giving to us.
Have fun !!Reply
Sankha December 13, 2018 at 7:04 am
Sir,I have one question – why don’t you trade in Index options?Reply
KV Rao December 14, 2018 at 5:42 am
because they are not at 52 week lowReply
admin December 14, 2018 at 7:54 am
It is not like that. Indices do not have high volatility. Hence big gains are not very frequent. We have to have an edge while trading. NIFTY trading has to be different than stock options. I do it occasionally but do not suggest it here.