PostMortem on Bank Nifty Today & Analysis of 04 NOV 2022Banknifty opened right at the support/resistance level of 41314 touched the next resistance level of 41455 in the first candle. The 3rd candle showed a bullish tone when i thought BN took support at 41314 and rallied again to 41455, but over the next 2 candles BN gave away that hope.
By 09.40, bank nifty had dropped below the SR level and traded the entire day below that. From 09.30 to 10.40 it made a good lower swing - but the momentum was not adequate for further follow up selling.
We need to give some credit to the Indian indices now - the resilience is the best in the world. No other major markets are staying up at all time highs as the Indian market is. And no amount of negative cues or macros are triggering the selling button.
The move from 14.10 to close was again a small rally that helped BN close back at the SR level. Final close at 41297.
Due to the normal range bound trading and the open/close being almost same - the option prices did not swing that much. In fact the PE option prices are relatively cheap - it could also be attributed to the India VIX staying low (fell another 1.8% today to 15.6550%). Compare that with US VIX which is 25.38.
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Of the major bank nifty components -
HDFC Bank and ICICI showed bearish momentum, although ICICI did some good recovery in last 30mts.
SBI made bullish tone after breaking out at 13.45 (may be due to earnings expectation)
AXIS & Kotak started the day with bearish tone, but axis closed in green and Kotak flat
IndusInd bank closed in green but by creating a flattish chart pattern.
But the opening 20mts candle formation on HDFCBk, SBI, Axis and Kotak are quite surprising - again it must be trade settlements by FIIs in the pre-open session
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Most of the option strategies would not have worked today, primarily because the implied volatility was low and the decay in time was not really worth it.
Straddle would have given good results, since open & close are at same levels - but the stop losses would have hit at both ends. A simple short iron fly would have worked out better - since the stop loss is not required for.
I tried out the put ratio spread when BN broke the support at 09.23 ie sell 1 lost of 41300 PE at 407.75 and but 2 lots of 40700 PE for 152.47. Although the premium decayed the trade did not plan out well. I had to square it off at 317.55 and 111.05 a loss of 33.95 pts. I will have to check if some other ratio or strike price would have resulted in a profit - will get that done offline.
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SPX & Bank nifty gap is widening - a total decoupled Indian stock market as of now
SPX upcoming support is at 3641, resistance at 3737. The big red candle formed at 14.30 02 Nov would have a story to tell after taking out the gains made from 24th Oct.
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15mts showing perfect sideways market
1hr also shows perfect sideways move - the 1st candle of 03 Nov might have a story to tell on the upside.
1D pattern shows upside move if the BN is able to break from the consolidation at present.
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Bank nifty support & resistance levels
s1: 40867, s2: 40691
r1: 41312, r2: 41455
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PS: Read the standard disclaimer at: bit. ly/3Nm3RER
