Nifty View: Update for 7th Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened on a positive note today shrugging the massive 600 point overnight fall in US stocks but selling soon emerged and took Nifty below 10650 however bulls again pulled the index back to 10700+ levels. After few wild swings Nifty final closed at 10727 ( up 57 points).

Nifty overall has a good support in 10640-10710 level range and even though same was broken during intraday, the final closing was above this level only. To change the current trend Nifty must start trading positively above 10750 levels and make a close above 10800 levels on Monday. Till that happens, we will continue with our bearish stand. On the other hand,for downward trend to pick speed, we must see a close below 10600 soon.

Overall indicators were pointing toward a short term bounce today and that's the reason we covered part of our short today (@10640). Now ideally this pullback should fizzle out soon and Nifty should resume its downtrend, however a strength in Nifty from here onwards would mean that this pull back might extend. We need to observe next few trading session to decide our next trading strategy.

Critical thing to note is that support area for Nifty is extending with each week. First there was a sharp intraday recovery from 10340 levels ( election day result) then we had sharp intraday recovery from 10530 levels few days back and today we have seen a sharp recovery from 10640 levels. So support area is moving up and its compressing the price action. Once this compression is complete, Nifty will explode( up or down). This usually happens when markets are preparing to move big in either direction. We need to be very careful now as markets are about to give a break up pretty soon. That's the reason I mentioned in my previous note that one should keep the traded qty in check. Keep position light.

Technically speaking, there is no change in my previous wave count and I still believe markets are making a diametric ( or complex corrective) from lows of 10k.

Trading recommendations: We exited part short ( 1 part) today @ 10640 levels and even did one intraday small trade. Still holding the balance shorts for now and will square off or add more shorts depending on which way market start trending.

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Nifty Trade Update -4th Jan 2019

Update 10:34 AM:  Nifty CMP  10640- Exit 1 part shorts initiated in trade 1 ( 10688) . Hold balance 50% of trade-1 and 100% of trade-2 (10840). 1 part covered balance 3 part still open

Open short Positions
a) Trade-1 @ 10688 ( 1 part)
b) Trade 2 @ 10840 ( 2 parts)

Update 12:55 PM: Nifty CMP  10730- Sell 1 part again ( short covered in the morning sold again)

Update 02:00 PM: Nifty CMP  10700 Cover/Buy shorts initiated @ 10730 (1 part)

Open short Positions
a) Trade-1 @ 10688 ( 1 part)
b) Trade 2 @ 10840 ( 2 parts)


Update 03:05 PM: Nifty CMP 10720. Carry shorts for next week (net open position as mentioned above

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Buying Calls and Put? Big No No

Why Buying 'out of Money' Calls and Puts are not recommended

Lot of people keep asking me why we always go for Nifty Futures and recommend only writing ( selling) options and never recommend buying them. Well there are plenty of reasons, let me try and put few here for every ones benefit

Main cause of Leveraging and overtrade: Buying 'out of money call/put does create a leveraged position. If some has 1 lakh capital and he is trading in 'out of money option he would go and buy 10 lots of 100 Rs. If he is buying just 1 lot then its fine as only 10% of his capital is at stake. However people trade big and buy multiple lots and put 100% capital at risk. If you write call/put( i.e. sell first) then you can buy/sell only one lot with around 1 lakh capital so you are automatically restricted by exchanges to leverage. General rule of mkt is 1 lakh for one lot ( if you want to trade in 5 lots you should have 5 lakh capital) but how many people do you think do that? Every one want to trade 10-20 lot with 50K

Premium loss:  When you buy a out of money call/put you pay a premium. Lets say nifty is at 10800 and 10800 put is available at 200 Rs. Now nifty has to fall below 10600 in order for you to make any realistic profit. There is no guarantee that Nifty will start moving down the moment you buy puts. When you sell Nifty future you lose only when Nifty moves up (so chances of losing are 50-50). Now if you buy puts you lose when a) when nifty goes up and you lose b) when nifty does nothing and stay at same place so chances of you losing increases to 66%.. Now see what happens  when you sell puts. You gain when nifty moves up and you gain when Nifty does nothing. you only lose when Nifty falls ( so chances of losing drastically reduces to just 33%)

Math and odds are not on your side: like mentioned above, please remember that markets don't move or dont do anything 80% of times they move in big trends only 20% of time. So 80% of the times your put and call will become zero. If you buy call/puts then 4 out 5 times you will end up incurring losses its simple math. You might make money occasionally buying puts and calls ( if you are intraday trader) but if you are a positional trader and trading in out of money call/put then I am afraid you are going to lose most of the times. Premium you pay keep deteriorating every hour every day If the movement of market is not as per your expectations.

In nutshell you need 2 things to be in your favour if you want to make money by buying Calls and Puts a) Overall trend and b) speed of rise/fall and  if neither of this happens then you are done.

Out of money call/puts have no intrinsic value, its just a premium you pay to gamble on the underlying price and that premium keep on reducing everyday. If you really want to trade call/puts then go for 'in the money' options  like for example  nifty is trading at 10700 and 11200 put is available for 500rs (11200-10700= 500) so you pay NIL premium. Always see how much premium you are paying for calls and puts(premium is nothing but pure gamble).

Just see around yourself and ask any trader if hes made money consistently by buying and holding call and puts (its just not difficult its bloody impossible with odds and maths totally stacked against you). Why do you think people lose at casinos? its only because math is always tilted in the favour of casino owner and not in the favour of gambler. Same is here. For you to succeed bare minimum odds you need are 50:50 if its less than that then sorry you should not be interested. That's the reason big players always sell put/calls ( and collect premium)and retail investors buy them and lose it all.

I have seen lots of people wiping out their millions by buying calls and puts. if you are in stock markets purely for thrills and gamble then by all means go for call/puts. But if you mean business and serious about your trade then put your money where its worth.

Nifty View: Update for 4th Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Today, before the market opened, there was some hope among bulls that Nifty will be able to defend 10750-10800 levels ( Especially after overnight recovery in US stocks), however it was not to be. Nifty opened at par and kept on drifting down throughout the day and closed at 10670 level ( down 120 points). Its second consecutive day for Nifty where it has given 100+ point fall and in just 2 trading days Nifty has fallen from 10915 to 10670.

Even though the fall of last 2 days is sharp and has taken most bulls by surprise, regular reader of our blog and subscribers wont be surprised to see this as this is what we have been expecting/predicting since last few days.

Tuesday, when Nifty gave a closing at 10915, there was a small chance of market extending its gains and this corrective move extending on the upside for few more days(I had mentioned the same in my previous post  'Update for 2nd Jan' as well), however Bulls squandered away the opportunity or you may say that Bear came back with a vengeance and showed who is the boss right now.

Now the zone between 10640-10710 is extremely critical and has some solid support. It will be interesting to see if Bulls try to defend this zone. Silver lining for them is that this zone was not taken out today and market closed bang in the middle.

Technically speaking, we are still holding our old view that which says that G leg of diametric got over at 10922 and a new leg down has started now.(you may refer to my older posts for the wave counts). However we still need further evidence ( more weakness from here)  to confirm the same though it doesn't mean that Nifty can not rise from here. Anything can happen in markets and if Nifty throw any surprises at us then we should be prepared for same. If required we will adjust our wave counts and charts ( like the way we have been doing in past). 

Imp Thing: This is not the time to be adventurous, going forward the volatility might increase big time so keep the traded qty in check. I keep reiterating not to leverage or over trade in my daily whatsapp updates and blog posts. Going forward if there is a sharp rise in volatility (and the chances are it will) then it wont be a good situation for someone with a weak heart and leveraged trading position. Keep open position as light as possible and if you decide to book partial profits in between because you are not sure about carrying  shorts then by all means please do that. There is nothing wrong in it. Don't be greedy, markets can turn choppy anytime now throwing you totally offguard.

Trading recommendations:  Same as yesterday, I have been telling those holding longs to exit since Nifty hit 10900 and now we are at sub 10700 levels. If some one doesn't want to go short its fine, but don't hold any longs for time being.
 
We are holding shorts we initiated earlier @10840 and @10688 ( previous shorts initiated @ 10858 levels were covered @ 10535 earlier) and have been updating our subscribers through regular whats app updates as to what to expects and what needs to be done. If you wish to join us on whatsapp then please follow below link, its just a promotional offer and will soon be stopped.

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Nifty Trade Update - 3rd Jan 2019

Update 03:00 PM:  Nifty CMP  10680: Please continue holding shorts. For now trade is going more or less as per expectations. Will update if anything needs to be done ( someone with less risk appetite may book partial profits)



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Technical learnings: Thrust out of a Triangle

Limiting and Non limiting Triangles

 Now that we have covered most of the common forming triangles in my previous posts, the next question is how do we predict Market movement ( or set the target) once the Triangle is complete? To answer this question we need to carefully observe the triangle and try to find out if the Triangle is completing as " Limiting triangle" or "Non limiting triangle". Yes most triangle can further be categorized as Limiting or Non limiting. Thrust or move out of a triangle ( or target) is totally dependent on this.

To identify if the triangle in question is Limiting or non limiting one should look at the 'Apex Point' ( Apex Point is where both A-C and B-D line of the triangle meets). If the apex point is very near to E leg (meaning there is congestion near apex point) then its a non limiting triangle and if there is no congestion and apex point is far from end point ( i.e. E leg) then triangle is Limiting triangle

To make things more clear, lets have a look at below example



Limiting and Non limiting Triangles

Limiting Triangles:

• Like mentioned above, if the Apex point is far away ( general rule is total distance between E leg and Apex point should not be less than 20% of entire triangle). 
• Once the E leg is over you may take a trading position
• Trading target will be 75% to 125% of largest leg of the triangle

Non Limiting Triangle:

• Like mentioned above, in such triangles the apex point is very near to end point of triangle ( too much congestion near Apex point)
• Once the E leg is over, price action breaks in opposite direction
• But as the name suggests non limiting triangle has no specific range or target area and the thrust area out of it is 'non limited'
• Non Limiting triangles generally gives false break out and trend resumes in main direction pretty soon. In other words the movement which follows non limiting triangle may not last for long

Nifty View: Update for 3rd Jan 2019

Near Term Trend:  ↓ (Down)

Market update: After yesterdays sensation pull up in last hour, Nifty opened below 10900 again and traded weak whole day. It even touched sub 10750 levels momentarily before recouping some of the losses and closed at 10790 levels (down 120 points).

We have been saying for long that 10900 -10920 seems like the threshold for Nifty on the upside and that market trend still remained down even after the 100+ point recovery yesterday in late trade. I had also mentioned in my yesterdays post that "if market has to reverse then it has to reverse now there is not much time remaining" and we had a down move of 120 points today itself which proves that our chart reading and wave counts are more or less in right direction and for now we will stick to that.


Technically speaking, seems market has completed the G leg yesterday. It took exactly 4 days like the F leg now lets see if we can see a faster retracement of same in same or lesser time (which translates to Nifty breaking 10530 levels in next 3 days). However lets not think that far ahead and we should be taking each day as it comes. Today our immediate target was a close below 10810 and we achieved that as market finally closed at 10792 levels ( there were few attempts by bulls in the late trade to take Nifty above 10810 but those were not successful).

We had initiated a short trade yesterday (in just half qty) but exited later with a small loss. However today again we entered shorts around 10840 (full trade) and still carrying the same. 

Now slightly off topic, regarding yesterdays trade, many are writing me saying that we should have continued with our shorts yesterday. let me just reiterate, I never recommend carrying a trade if I am not convinced by the market movement or it is not moving as per my expectations. I am not afraid of exiting and booking small losses (and so shouldn't you). I am not a day traders and my aim is not to take 30-40 points. As a positional trader my aim is to catch the broader trend of the market and then ride along with it and if I lose 50-60 point in the process then its absolutely ok with me (in fact this is something I will  gladly accept any day). I understand its not easy and need lots of patience and a cool head so if you want to make money in stock markets then please start being mentally tough, keep a cool calm head always and don't worry about taking small losses. Waiting game in stock market can be dangerous when you know you are wrong then u have to exit ( no exception to this rule) there is no point in waiting because if market catches you on the wrong foot then it will wipe 100% of your capital in no time.

Overall  40-50% of my trades are wrong and will always be wrong, but my  profits are 50-100% time bigger  than my losses. Meaning my wrong trades will cost me 100 points but my right trades will give me 150-200 points. So in long run I will always be in profits (even if I am wrong half of the times). Cut your losses short and let your profits run. If  someone is expecting "100% sure shot calls each time" then I am definitely not the right person. 

Trading recommendation:  I have been advising exit from long position since last few days and still say the same. This is not a market to carry long, exit longs if you are still carrying. As far as our position we are concerned, we entered shorts today (like mentioned above) @10840 and still carrying the same. Need to observe market movement for next 2-3 days to decide our future course of action.

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