PostMortem on BankNifty Today & Analysis of 23 JAN 2023
Another boring price action today, the minimal variance in options premium after the morning jump shows the lack of volatility today.
BANKNIFTY
Gap up opening at 42891 right at the resistance level of 42888, The first candle showed a brief rejection, but the 3rd and 4th candles were quite strong and surged ahead. BN hit HOD of 43005 at 09.50 and from there we had a gradual decline till close.
This support level gave away at 11.15, but the drop was not looking dangerous. Even the gap was not filled indicating the strength of bulls. One good thing that happened today was the break out from the previous resistance level of 42573.
When gap ups or gap downs are taking out the resistances or support - it means that the traders are not convinced during the market hours to rally or break the index. So overnight a change in macro or fundamentals has to work in favor/against.
Today's gap up was not rejected, which means traders are not going against the upmove. They are happy to keep the index close to the open price. And you might already know this - bank nifty likes to take out the support & resistance via gap openings.
The lack in options premium shows lower probability of wild swings with 2 days to go for expiry. However if there is a slight news or event all the option writers at this low premium will be hurt pretty badly and they would run to cover.
When premiums are lower, its good to buy options or debit spreads or debit ratio spreads with good risk:reward because if there is a move - premiums will jump exponentially.
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Among the bank nifty components:
HDFCBANK
had a good opening start, 1.36% surge by 09.35 and then a gradual cooling off. From the results announcement, it is steadily gaining value everyday.
ICICIBANK
had good QoQ results, the opening candle had a volume of 2.122M much similar to the volume of opening candle on 20th Jan. So a 1.2% gap up opening and then a fall to the flat line all in 10mts. Profit bookings were evident by the 13.05 candle. Final close flat.
SBIN
had a gap up, fell to flat line and then rallied back in opening 10mts. 0.94% in opening candle itself. Final close of 1.39%.
AXISBANK
had good swings today, 1.07% upmove by 09.35, then a fall of 1.60% from HOD to LOD by 11.45. And a recovery of 0.98% by 12.25. Final close flattish.
KOTAKBANK
also had QoQ results impact. It was trending lower from 19th. Gap up opening of 1.62% today and a fall to 1770 level by 09.25. Gap was not closed which shows the new normal after the results. There was a rally attempt but it faded by 13.25. Final close 1.18% higher.
INDUSINDBK
did not have volatility today, the trend was a gradual trace back to flatline after a 1% gap up.
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15mts and 1hr TF is confirming the break of 1st resistance, so the 15mts chart is looking a bit bullish today, 1hr may start showing bullishness if tomorrow we are trading above the resistance band of 42900 to 43000.
If the global markets are also surging in green today, there is every possibility that we participate in that too.
The news of FII selling is not creating any negative impact to indices as of now, because the domestic buying is so intense. I am still waiting to deploy cash because the current valuations are scaring me. I will wait till we drop below 29000 to renter or if we stay at the current prices till 2024.
BANKNIFTY
Gap up opening at 42891 right at the resistance level of 42888, The first candle showed a brief rejection, but the 3rd and 4th candles were quite strong and surged ahead. BN hit HOD of 43005 at 09.50 and from there we had a gradual decline till close. This support level gave away at 11.15, but the drop was not looking dangerous. Even the gap was not filled indicating the strength of bulls. One good thing that happened today was the break out from the previous resistance level of 42573.
When gap ups or gap downs are taking out the resistances or support - it means that the traders are not convinced during the market hours to rally or break the index. So overnight a change in macro or fundamentals has to work in favor/against.
Today's gap up was not rejected, which means traders are not going against the upmove. They are happy to keep the index close to the open price. And you might already know this - bank nifty likes to take out the support & resistance via gap openings.
The lack in options premium shows lower probability of wild swings with 2 days to go for expiry. However if there is a slight news or event all the option writers at this low premium will be hurt pretty badly and they would run to cover.
When premiums are lower, its good to buy options or debit spreads or debit ratio spreads with good risk:reward because if there is a move - premiums will jump exponentially.
---
Among the bank nifty components:
HDFCBANK
had a good opening start, 1.36% surge by 09.35 and then a gradual cooling off. From the results announcement, it is steadily gaining value everyday.
ICICIBANK
had good QoQ results, the opening candle had a volume of 2.122M much similar to the volume of opening candle on 20th Jan. So a 1.2% gap up opening and then a fall to the flat line all in 10mts. Profit bookings were evident by the 13.05 candle. Final close flat.
SBIN
had a gap up, fell to flat line and then rallied back in opening 10mts. 0.94% in opening candle itself. Final close of 1.39%.
AXISBANK
had good swings today, 1.07% upmove by 09.35, then a fall of 1.60% from HOD to LOD by 11.45. And a recovery of 0.98% by 12.25. Final close flattish.
KOTAKBANK
also had QoQ results impact. It was trending lower from 19th. Gap up opening of 1.62% today and a fall to 1770 level by 09.25. Gap was not closed which shows the new normal after the results. There was a rally attempt but it faded by 13.25. Final close 1.18% higher.
INDUSINDBK
did not have volatility today, the trend was a gradual trace back to flatline after a 1% gap up. ---
15mts and 1hr TF is confirming the break of 1st resistance, so the 15mts chart is looking a bit bullish today, 1hr may start showing bullishness if tomorrow we are trading above the resistance band of 42900 to 43000.
If the global markets are also surging in green today, there is every possibility that we participate in that too.
The news of FII selling is not creating any negative impact to indices as of now, because the domestic buying is so intense. I am still waiting to deploy cash because the current valuations are scaring me. I will wait till we drop below 29000 to renter or if we stay at the current prices till 2024.
