NIFTY Outlook for October 8, 2020: Key Insights and Strategic Trades
Market Sentiment and Technical Indicators
As of October 8, 2020, the all-important NIFTY index, along with other global indices like the Dow, SP 500, and Nasdaq, closed in a shadow of red. This dark red signal indicates a turning trend, suggesting that sentiment is deteriorating. The selling pressure commenced only in the last hour of the trading session, implying that the global market is signaling negative directions.
Based on current market signals, trading caution seems highly advised for the next day. The potential range of NIFTY for tomorrow is expected to be between 11500 on the higher side and 11100 on the lower side. For detailed insights, traders are encouraged to seek advice from their financial advisors.
Intraday Trading Updates and Analysis
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NIFTY Daily Chart Analysis
From the daily charts, NIFTY appears weak with a closing below 11340. If this trend continues into the next day and NIFTY drops to the 11225-11250 range, then traders should be cautious. The recommended trades for tomorrow are as follows:
Sell near 11300-11325 with a stop loss (SL) above 11340. Buy near 11250-11225 with a stop loss (SL) below 11200.It's important to remember that trading short positions can be risky. If the border tensions ease, we could see a market rally. Therefore, traders who are risk-averse should avoid taking any positions. Those who are more aggressive should manage their stop losses strictly.
Derivative Data Analysis at 9th September Expiry
At the 9th September expiry, the highest OI (Open Interest) in calls stood at the 11600 strike price, and in puts at the 11000 strike price. The 11300 and 11400 strike prices also showed a significant OI, indicating strong resistance levels.
Previous Day’s Recommendations
Based on yesterday's recommendation, the following stocks performed well:
Tata Motors saw a notable performance, trading from 122 to 126.4, and was advised to hold the position for more. Adani Ports saw a booking opportunity at 346. Deepak Nitrite hit a high of 607 but the advice was to exercise patience.Market Setup for October 9, 2020
The market setup for NIFTY tomorrow still holds the same bullish sentiment with NIFTY closing above 11300. NIFTY faces resistance at 11340 and has support at 11225 with a strong support at 11050.
The recommended trade for tomorrow is a buy near 11275-11300 with a stop loss (SL) below 11225. It's crucial to maintain strict stop losses given the current market environment.
Derivative Data Check at 13th August Expiry
At the 13th August expiry, the highest OI in calls stood at the 11500 strike price, and in puts at the 11200 strike price. Notably, the 11300 and 11350 strike prices show a significant concentration of open shares, indicating resistance.
If NIFTY sustains above 11350, the open contracts at the 11300 and 11350 strike prices may initiate a massive short-covering rally towards 11400. Should NIFTY drop below 11300, another 100-point drop to 11200 can be anticipated.
Considering the current data, NIFTY faces resistance, and traders are advised to maintain a strict stop loss for the day.
Trading Strategy and Verdict
A potential trading strategy is to sell 2 lots of 11500 call options and simultaneously sell 1 lot of 11250 put options to hedge the position. However, it's important to note that this strategy is not backtested and should be used with caution.
The overall verdict is positive to flat for the upcoming expiry but traders should be prepared for any volatility.
Stocks to watch:
Deepak Nitrite Tata Motors IndusInd BankDisclaimer: The above recommendation is for educational purposes only and should not be considered as a buy or sell call.
See you tomorrow!