India VIX Update 26 July 2022India VIX is trading at crucial levels of 17-18 as we move towards quarterly closing in Sep. Big bear Marker indicator is making higher lows from many weeks and now hesitant to go below 0.5 equilibrium value
Expectations
VIX to rise up to a level of 40+ creating a panic situation in mkt in coming month +- 10 days
Trading such a volatile market will not be an easy job , we will be updating live on platforms as markets unfold some dramatic moves.
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Details can be found below
INDIAVIX trade ideas
NIFTY Possibilities Compared With India VIXEven though the chart is self explanatory, I have tried to compare NSE:NIFTY with NSE:INDIAVIX
Blue line is NSE:INDIAVIX
Brown line is NSE:NIFTY
Dashed red line is trendline support and NF breaking above that
Light yellow line is support line for NSE:INDIAVIX
2 possibilities exist -
1) India Vix continues to trade below or near the support line, and we may see some price stability for NF. Before embarking on the next journey, we may inch higher or consolidate around these levels.
2) The India Vix rises again, and the price begins to fall from its current levels.
Another thing I noticed unfolding on both indices charts is this -
1) NF & BNF on DTF are almost at the upper end of Bollinger Band
2) Trading above 20/50 EMA
3) Both indices have a rising window candlestick gap on DTF ( July 6th and July 7th ) -
a) It is a bullish continuation candlestick pattern
b) A Rising Window candlestick pattern is a 2 candlestick pattern
1) There must be an empty space between the two candlesticks in the pattern where the prices do not overlap
2) Pattern is characterised by a price gap appearing between the first candle's high and the second candle's low
c) It is possible for the first of the two candlestick patterns to have a red coloured real body, however the most likely scenario is two green coloured candlesticks that
make up the pattern ( this has been established with the candles formed on both indices on July 6th and July 7th )
For July 8th, from my limited knowledge, 2 possibilities exist -
1) We fill the gap on the downside and close below the high of July 6th candle. This would nullify the pattern and price may head down again as bears have taken the control during this upmove
2) We go down and close just above the high of July 6th candle without completely filling the gap. If this happens, bullish momentum for the time being should continue
Let's see which way the story unfolds. Happy Trading!
Disclaimer -
- The view expressed here are my personal views. I am publishing this for my own records and what I see on charts.
- If you're referring to this, please consider this ONLY FOR educational & research purposes.
- Past performance is not a guarantee for future predictions
- Any decision you take, you need to take responsibility for the same. DO NOT consider this as an investment suggestion.
- It's your hard earned money. Treat it wisely
- Trade / Invest keeping in mind your trading style, goals and objectives, time horizon & risk tolerance
- Do your own analysis and consult your financial advisor before investing.
TIA!
What does the Volatility Index (VIX) indicate you?The volatility index (VIX) is a measure of market volatility, which is why it is called the volatility index. Since a high level of VIX represents a high level of fear in the market and a low level of VIX indicates a high level of confidence in the markets, it is referred to as the Fear Index in common parlance.
The VIX is typically used to measure the near term, and as a result, the VIX is calculated using options expiring in the current month and the following month. The VIX index is based on the assumption that the option premium on key Nifty strikes reflects the implied volatility in the broader market environment.
1. To traders in the equity markets, the VIX is a very valid and realistic indicator of market volatility. The stock traders who engage in intraday trading as well as short-term traders benefit from this information because it allows them to determine whether market volatility is increasing or decreasing. They will be able to adjust their strategy as a result. For example, when the volatility is expected to spike sharply, intraday traders run the risk of their stop losses being triggered quickly, which can be disastrous. As a result, they can either reduce their leverage or increase the size of their stop losses as necessary.
2. The VIX is also a very good indicator for long-term investors, as previously stated. Generally speaking, long-term investors aren't overly concerned with short-term fluctuations in the market. Institutional investors and proprietary desks, on the other hand, are restricted in their ability to take risks and incur MTM losses. When the VIX indicates that volatility is increasing, they can increase their hedges in the form of puts, allowing them to participate in both directions of the market.
3. The VIX index is also a useful indicator for traders who trade options. Typically, the decision to buy or sell an option is based on the volatility of the underlying asset. In situations where volatility is expected to increase, options are likely to become more valuable, and buyers are likely to benefit more from their purchases. When the VIX falls, there will be more wasting of time value, and option sellers are more likely to benefit from the decrease in the VIX.
4. It is also beneficial in the trading of volatility. If you believe that the markets will become more volatile in the near future, one strategy is to purchase straddles or strangles. However, when volatility is expected to increase, these become prohibitively expensive. A better strategy would be to purchase futures contracts on the VIX index itself, which would allow you to benefit from volatility while not having to worry about the direction of the market's movement.
5. The VIX index is a very good and reliable indicator of the movement of the stock market. If you plot the VIX against the movement of the Nifty for the last nine years, since the inception of the VIX, you will notice a clear negative correlation in the charts themselves. As a rule of thumb, markets tend to peak out when the VIX is at its lowest point, and markets tend to bottom out when the VIX is at its highest point. For index traders, this is a useful piece of information.
Now what exactly does the VIX value signify?
Assume the India VIX is 20. This means that traders anticipate 20% volatility over the next 30 days. In other words, traders anticipate that the Nifty will be worth between +20% and -20% more than it is now in the next year over the next 30 days. When market participants are fearful or complacent about the future of the market, the VIX index can be used to determine their level of confidence. The VIX index gives a more precise picture of the market's choppiness.