NIFTY was below 10900 on Friday ( 19-01-2018 ) close.
Market has gone above 11000 since then in next 3 sessions. Today’s session is still live at the time of writing.
We had discussed how to identify the weak stocks by looking at the data from past 30 days and comparing it with NIFTY. Then having a look at the last 7 days and coming to a conclusion about it. This is a very simple way to find stocks for shorting or buying PUT options.
Participants will recall that we had singled out BHARTI AIRTEL as the weakest of the under performing stocks. Another one identified as weak was TATA MOTORS.
Both these stocks did not participate in the up move made by NIFTY on Moday and Tuesday ( January 22 and 23 ) and have shown weakness today.
For trading VOLATILITY it was advised to buy CALLS/PUTS at 8-10% away strikes when some time is left to expiry. But with expiry just two days away, just ATM or slightly OTM options should be bought to minimize the risk.
Here is how the PUTS in these identified stocks worked out:
BHARTI AIRTEL PUT 480 for January 25 Expiry was Rs. 0.85 yesterday.
Today it went up to Rs. 19.00 during trading.
A fantastic reward for identifying the weakness and acting on it.
TATA MOTORS PUT 400 for January Expiry closed at Rs. 0.40 yesterday.
Today, it has touched a high of Rs. 1.40 during the trades so far.
Not as spectacular as BHARTI AIRTEL but good trade nonetheless if someone took it.
The other volatile stocks discussed are doing over last 3 sessions what they do best. Remain volatile.
We do not need a lot of technical tools to initiate a trade.
Plain simple common sense coupled with the understanding of the trend or counter trend is as good a tool.
BHARTI AIRTEL was shown as an example.
It worked out.
Had it failed, the loss would have been negligible. ( Remember, Option Buyers have limited loss )
When the trade goes right, rewards are worth much more than the risk.
I hope some of you made such an analysis and got rewarded.
If no, keep looking and surely at some point you will succeed.
Disclaimer : I do not give trading advice or tips. The method of analysis was discussed for teaching and understanding the concepts of trading. This site does not advise you to trade in the stocks mentioned in the post or otherwise. Please take trading decisions based on the advice of a certified professional and considering your financial liabilities.