Month: June 2021

Jun21-W4: Sky is the limit for this week (Jun28 to Feb2)?

Nifty Index 50 did slip below my green trendline only to claw back. Despite the gap openings, Nifty continued to remain within a defined range. It couldn’t break the red box but it did not go down either and thereby, vindicating my last week’s theory of consolidation.

Now, here’s what I am looking at:

Despite the negative divergence and hit from red box, Nifty continues to hold itself quite well. It is resilient to any downward movement. Moreover, banknifty has joined the party with fireworks. Thus, my bias is on upside with a big movement coming up. But I have this big red box on top which is Fibonacci extension of Nifty’s upward trend since last year. Fibonacci is always subjective but I believe 16200 should give resistance for now.     

Thus, scenarios for the week ahead (highlighted as yellow box with black lines dissecting scenarios)…

ScenarioProbabilityAnticipated Price Action
ConsolidationMediumBetween 15925 and 15650
DowntrendLowIf breach below 15650; to drop somewhere till 15450
UptrendHighIf breach above 15925; to rise somewhere till 16200

If this upward move happens, it might be nothing but part of the failed breakout which I have been anticipating for quite some time now. Basically, Nifty might breakout above the wedge (drawn as combination of red and green trendlines) only to fail. Let’s see.

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

Jun21-W4: Beats target CAGR

The last and only time I sold OTM strangle positions on Nifty was in 2nd week of April.  I then found myself caught in Covid assistance to family and then household and then office chores. It is not that I did not take any trades during that time. I took really stupid trades and lost a lot of money. Trading must be done with a free mind. 

Anyways, based on my view for Jun21-W4, I sold OTM strangle from Jun 18 to Jun 24 whose daily candles were like this:

Here are the results:

Net Profit (after deducting brokerage)Capital deployed (approx)Week’s ROIAnnualized ROI
Rs. 3,437Rs. 5,81,0000.591%35.9%
where annual return = ((1+week’s return in decimal)^52-1)*100

The following is breakdown of trades:

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

mean reversion strategy

Jun21-W4: Reversion to mean is money

My view on Nifty 50 index for the week was mostly neutral with a tinge of bearishness. Thus, I began Jun 18th by selling calls but by the end of day the market was looking quite poised. So, I created a strangle and had no clue what could happen on Monday.

Mondays now are turning out to be ridiculous. They usually used to be dead but now they start the week with a bang. Jun 21 was again one of such weeks. There was a nice gap down which gave me opportunity to sell more puts as Nifty was far away from its intra-day mean.

Now adding more positions is something that I can do today with the power of converting a delivery (NRML) position to intraday (MIS) position. Unfortunately, SEBI is all set to snatch this power soon. Until then, I guess I should make the most of it. I ended Monday again with strangles. In my subconscious, I knew it was not a good move as I knew market was going to be positive.

But I did not exactly expected this much positivity. Tuesday was a gap up day which made my call options go in red. In scenarios like these, the other side i.e. put options don’t return as much profit as the call options show loss. Based on my homework, I believed that Nifty won’t cross resistance and mean reversion might save again.

Luckily, Nifty didn’t go up further and by Wednesday, I took 1st July strangles. Since I took positions early, I am pretty excited about next week’s P&L results. I am determined to trade Nifty strangles every week, with a hope to maintain CAGR as a high double digit positive number.  

Jun21-W4: Nifty to consolidate this week (Jun21 to Jun25)?

Being right is one thing, being right to the decimal is awesomeness. Nifty somehow traded exactly between the black lines which I drew for last week, though I would have preferred it to break 15650 and fall to 15450. But it does give me confidence in my technical analysis skills. The unanticipated surprise though was Monday with Adani news breaking the internet and charts.

Now, here’s what I am looking at:

Nifty 50 index looks sandwiched and most likely it is going to stay that way at least till first half of the week. If the green support line is broken, we can see it slip to or below 15450. I continue to hold downward bias since I believe RSI needs to cool down and touch the support trendline.

Thus, scenarios for the week ahead (highlighted as yellow box with black lines dissecting scenarios)…

ScenarioProbabilityAnticipated Price Action
ConsolidationHighBetween 15925 and 15450
DowntrendLowIf breach below 15450; to drop somewhere till 15250
UptrendLowIf breach above 15925; to rise somewhere till 16100

There continues to be a lot of skepticism around Adani group shares and if they are being manipulated via fund houses. Hopefully, the news has been accommodated and there should not be any surprises. The bigger news is Fed increasing rates which means flight of capital from emerging markets is on the cards.

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

Jun21-W3: Nifty to give failed breakout this week (Jun14 to Jun18)?

I was anticipating that Nifty would go above the red trendline only to revert back. It did happen but everything was super slow. Lack of momentum did not let Nifty break 15600 and so the week simply died in a bullish consolidation.

Now, here’s what I am looking at (I have changed EMA & RSI settings as compared to last charts):

Timing of future price action is not something I am good at. My theory of failed breakout did not quite materialize last week but I still have the same bias. Therefore, my target for now continues to be the green rectangle around 15450. For that to happen, 3 trendlines would need to be broken but RSI divergence should take care of it.   

Thus, scenarios for the week ahead (highlighted as yellow box with black lines dissecting scenarios)…

ScenarioProbabilityAnticipated Price Action
ConsolidationMedBetween 15900 and 15650
DowntrendMedIf breach below 15650; to drop somewhere till 15450
UptrendMedIf breach above 15900; to rise somewhere till 16050

There was just 1 high range candle last week. Let’s see if the fall happens this week. Option buyers would still need to time it properly. And since I lack that skill, I would prefer to sell call options if I can squeeze some free time from office.

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

Jun21-W2: Nifty Index 5- to revert to mean this week (Jun7 to Jun11)?

Beginning last Monday with a high range bullish candle, Nifty continued its upward momentum. In such a scenario, my target for Nifty was 15650 but it even breached 15700. I can’t complain much as it is always tough to give a target when skies are clear. And well, Nifty did close the week at 15650 anyway.  

Now, here’s what I am looking at:

I now have a hard bias for mean reversion as this is the kind of setup wherein I like to sell call options. It is entirely possible for Nifty to go above red trend line but that would be a fake breakout. My target for now is the green rectangle around 15450.    

Thus, scenarios for the week ahead (highlighted as yellow box in chart)…

ScenarioProbabilityAnticipated Price Action
ConsolidationMedBetween 15600 and 15850
DowntrendHighIf breach below 15600; to drop till 15450
UptrendLowIf breach above 15850; to rise but not by much

The daily ATR of Nifty has been declining steadily and may bottom out in a couple of weeks. Low ATR is a pain for option sellers as they make safe money but not much money. Things shall become interesting when ATR turns its head upward again.     

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.