PostMortem on BankNifty Today & Analysis of 18 NOV 2022
Bank nifty opened at 42545 quite midway between yesterday's swing high and swing low and then created a red bearish 5mts candle. There was an attempt to take out the highs of the 1st candle over the next 7 candles - but it was unsuccessful.
Then we had a good drop from 09.50 to 11.10 a fall of over 314pts - but this selling was arrested very quickly and we had a pull back of 119pts by 11.45. The 2nd leg of the selling was not that strong, eventhough the day's low was taken out by 13.40 there was no follow up selling.
And then something strange happened, the 2 candles ie at 14.20 and 14.25 took out the selling bias of the 2nd leg today. These 2 candles negated the price action of previous 28 candles. People used to say stock market takes the stairs going up and then comes down in an elevator. But the last 4 to 5 months the bank nifty is the exact opposite - it takes the stairs down and then shoots up using an elevator.
Again hats off to the bulls and their conviction to go long. The rally of the last 1 hour made sure bank nifty closed flat for the day.
The option premiums of the CEs in the last 1 hour were behaving crazy. The premiums rose along with incremental volume - which according to me shows bearishness. The option writers got the opportunity to sell the same strike price at a higher value compared with the closing rate of 17th Nov.
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Of the bank nifty components
HDFC bank was trading in negative region and then got a sudden surge at 14.20 to reach for the flat line and then finally closed lower
ICICI Bank was also trading in negative region - making 2nd leg of lower lows but the surge at 14.20 gave it massive momentum that made it close positively
SBI had an instant upswing in the opening 30mts but this was sold into. Did not trade below the flat line that much and then finally closed pretty higher.
AXIS had the surge opening 15mts and then traded in a range till 12.05, then a round of selling till 14.10, the last 1 hr of surge ensured the closing was in green.
Kotak had huge buying momentum till 09.50 but this was gradually sold into - did not tread into negative region and ended up closing a bit higher.
IndusInd had bearish chart pattern today, the final 1hr did not give it enough strength unlike other banks.
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Bank nifty made a sharp recovery in the last 1 hour of trade - this would have hit the stop loss of many traders who were option writers.
Also the far OTM call prices were spiking unusually - something that normally happens when the majority of participants are bearish. But bank nifty did not show bearish intent in the last 1 hr - infact it showed bullish recovery.
Both ratio spreads would have worked out if you got the timings correct, we always sell 1 lot of near ATM and then buy 2 lots of far ATM. Usually the premium will be a small net debit. This works wonderful on Fridays and Mondays.
Whereas for Tuesday and Wednesday the same ratio is done but the premiums of 1 lot sold should be greater than the 2 lots bought to take advantage of the time decay.
I started with selling far OTM strikes and then hedging it with debit ratio spreads. But now the ratio spreads are starting to give more bang for the buck as the VIX is lower and any small directional move we get - the premiums jump.
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SPX vs Bank nifty -9.9% vs +13.13% - much road to catch up
Yesterday's trade in SPX, opened below the resistance line and then closed right at it. It did not have strength to cross the resistance yesterday - lets see what happens today.
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15mts vs 1hr chart - doesnt show bearishness yet. 1hr still shows bullish bias.
1D vs 1W time frame - both looks stunningly bullish. The weekly time frame has made a green candle above the last week's action.
Tomorrow i will write about why the FIIs should start considering selling bank nifty now and the multiple benefits they are going to get !
Then we had a good drop from 09.50 to 11.10 a fall of over 314pts - but this selling was arrested very quickly and we had a pull back of 119pts by 11.45. The 2nd leg of the selling was not that strong, eventhough the day's low was taken out by 13.40 there was no follow up selling.
And then something strange happened, the 2 candles ie at 14.20 and 14.25 took out the selling bias of the 2nd leg today. These 2 candles negated the price action of previous 28 candles. People used to say stock market takes the stairs going up and then comes down in an elevator. But the last 4 to 5 months the bank nifty is the exact opposite - it takes the stairs down and then shoots up using an elevator.
Again hats off to the bulls and their conviction to go long. The rally of the last 1 hour made sure bank nifty closed flat for the day.
The option premiums of the CEs in the last 1 hour were behaving crazy. The premiums rose along with incremental volume - which according to me shows bearishness. The option writers got the opportunity to sell the same strike price at a higher value compared with the closing rate of 17th Nov.
---
Of the bank nifty components
HDFC bank was trading in negative region and then got a sudden surge at 14.20 to reach for the flat line and then finally closed lower
ICICI Bank was also trading in negative region - making 2nd leg of lower lows but the surge at 14.20 gave it massive momentum that made it close positively
SBI had an instant upswing in the opening 30mts but this was sold into. Did not trade below the flat line that much and then finally closed pretty higher.
AXIS had the surge opening 15mts and then traded in a range till 12.05, then a round of selling till 14.10, the last 1 hr of surge ensured the closing was in green.
Kotak had huge buying momentum till 09.50 but this was gradually sold into - did not tread into negative region and ended up closing a bit higher.
IndusInd had bearish chart pattern today, the final 1hr did not give it enough strength unlike other banks.
---
Bank nifty made a sharp recovery in the last 1 hour of trade - this would have hit the stop loss of many traders who were option writers.
Also the far OTM call prices were spiking unusually - something that normally happens when the majority of participants are bearish. But bank nifty did not show bearish intent in the last 1 hr - infact it showed bullish recovery.
Both ratio spreads would have worked out if you got the timings correct, we always sell 1 lot of near ATM and then buy 2 lots of far ATM. Usually the premium will be a small net debit. This works wonderful on Fridays and Mondays.
Whereas for Tuesday and Wednesday the same ratio is done but the premiums of 1 lot sold should be greater than the 2 lots bought to take advantage of the time decay.
I started with selling far OTM strikes and then hedging it with debit ratio spreads. But now the ratio spreads are starting to give more bang for the buck as the VIX is lower and any small directional move we get - the premiums jump.
---
SPX vs Bank nifty -9.9% vs +13.13% - much road to catch up
Yesterday's trade in SPX, opened below the resistance line and then closed right at it. It did not have strength to cross the resistance yesterday - lets see what happens today.
---
15mts vs 1hr chart - doesnt show bearishness yet. 1hr still shows bullish bias.
1D vs 1W time frame - both looks stunningly bullish. The weekly time frame has made a green candle above the last week's action.
Tomorrow i will write about why the FIIs should start considering selling bank nifty now and the multiple benefits they are going to get !
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