The markets experienced extreme volatility, and the Met department’s prediction of below-average rainfall dampened sentiments further. The Nifty made a lower low formation on the charts with today’s low being lower than its recent low on the 26th of March.
The Nifty opened at 8400.40, 23 points above yesterday’s close and tried retaining its position in the early part of the day. The Met department’s below-average rainfall prediction spooked the markets, and it touched an intraday low of 8284.70. In the later part of the trade, it regained ground and found itself in positive territory touching a high of 8449.95 however closing a tad bit lower at 8429.70. An up move of 0.6% or 51.95 points. The 8200 put and the 8600 call saw the highest open interest build up in trade today.
Market breadth stood in favor of the bears in the later part of the day with 723 stocks declining and 638 advancing at the time of close.
The Bank Nifty opened at 18196.80. It touched an intraday low of 17798.70 and an intraday high of 18297.20 before finally settling at 18243.70. Up by 0.8% or 137.95 points. The 18000 put and the 18500 call continued to see the highest open interest build up in this series.
FIIs were net sellers to the tune of 910.15 crores while DIIs were net buyers of 217.98 crores in the cash markets.
Technical Analysis – Nifty & Bank Nifty
There is no news like bad news. I remember listening to this dialogue in one of the James Bond flicks. Well, with weak earnings, rising crude prices, reform bills not clearing, the Met’s forecast only catapulted the market to touch the lowest point this year. Technically the markets look extremely weak in spite of the late comeback that we saw today.
There are two interesting observations as per the Ichimoku, Heikin Ashi Chart of the Nifty. From a pure Ichimoku perspective, the Nifty looks weak and can be shorted on any rise. The Tenkan Sen has broken out of the cloud on the bearish side today and hopefully should cross the Kijun Sen tomorrow. All other indicators clearly are in the favor of the bears, and we might see additions to the already existing short positions in a day or two. haDelta, the leading indicator for Heikin Ashi Candlestick Charting is about to crossover suggesting a pullback in the offing. The way I look at it is that this pullback will be sold into. We will see further additions in the short positions in a day or two once the Nifty has pulled back to around 8500 – 8550 levels.
As pointed out yesterday, the Bank Nifty has exhibited signs of a pullback. Similar to the Nifty, there is a high probability of this pullback getting sold into and I would only recommend adding further to existing short positions on every pullback. All indicators of the Ichimoku Chart look weak. The Heikin Ashi Candle of the Bank Nifty has been showing signs of a pullback from yesterday and today’s trade action only confirms it.
Trade Setup Update
Our Nifty Futures call has achieved all three profit targets. Yesterday we had achieved the first two targets and today we have achieved the third. We have made INR 7500 per lot in 3 trading days. While I expect further weakness, this call is closed.
Our Bank Nifty futures call has also hit our first profit target today. We made around INR 12500 per lot in 3 trading days. As mentioned above, I recommend holding the open position and adding to it on every rise. I am certain that we will achieve all targets in the Bank Nifty as well.