Weekly Analysis and Option Strategy for 14th – 20th June 2019

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Hello friends,

Hope you all are doing good in your trading. This week was very good for option writers because index was traded in a range only. If we look at our Weekly Analysis and Option Strategy report, our weekly strategies consistently making money in every condition of market, which is a good sign for our followers. I request you to subscribe our Push Notification or our mailing list to get these strategies and updates direct on your phone through push Notification or email.

Weekly Analysis:

  • After making all time high on election result day, we saw market is facing some pressure at all time high. Somehow it manages to hold all time high zone but shows lack of buying interest because of uncertain global market and weak domestic cues.
  • We saw a selling pressure in most of the High Beta Stocks which were the main contributor for this market rally. In BSE500, 79 stocks which have a beta value higher than 1, gave negative return.
  • Media, Pharma & Auto sector are the top loser, which gave 7-14% negative return in last 3 months. On the other hand Reality, Finance & Banking Sector compensate this negative return and gave 7-12% Positive return in last 3 Months.
  • FIIs sold around 1000cr in cash market in last one week, where DIIs are net buyer of around 200cr in cash market only. Overall Market breath is looking weak as per market participants.

Nifty trend based on Technical Analysis :- Nifty : 11914.05

Weekly Analysis Nifty
  • If we look at the Chart, Nifty is trading in a range of 12000 – 11800 in this entire week. On 7th June it tried to give a breakdown but couldn’t manage to sustain below 11800 and closed in Positive. A breakdown or breakout from this range will only lead to further levels. On Upside 12041 – 12130 will act as a strong resistance zone and a clear breakout is required for a new strong rally.
  • On the Lower side 11800-11750 will act a strong support zone, Breakdown will lead to more downside levels.
  • There is a Gap between 11615-11415, which is still open and Nifty would try to fill this gap before its new upside journey. So keep this gap on your radar.
  • RSI & MACD both are showing weakness in strength and momentum with negative diversance, Which is a bearish sign and same we have witnessed from last couple of sessions.
  • Overall medium to long term trend is UP and still no sign of weakness.

Open Interest Analysis:

  • Based on option chain data, the highest open interest stands at 12000 CE & 11800 PE followed by 11900 CE & 11900 PE. PCR of all strikes is 0.82 which is a neutral zone. PCR at 11800 stands at 3.84 which is acting as an immediate support level, PCR at 12000 stands at 0.17 which is acting as an immediate resistance level. Equally, important indicator Option Pain is at 11900, indicating expiry at 11900. A shift in option pain will provide further levels.

Weekly Strategy : Iron Butterfly

option strategy
  • Adjustments not required for this strategy. Just book loss and close this strategy once it breaches break even points.

BankNifty Trend Analysis based on Technical Analysis :- BankNifty : 30976.10

Weekly Analysis BankNifty
  • As i shared in my previous Weekly analysis and option strategy post, that 30660 is a very strong and game changer support level. BankNifty is giving respect this level and after 3 time approach to this level, still holding this level.
  • This entire week BankNifty traded in a range of 31400-30700 most of the time.
  • We saw some pressure on higher levels due to mute activity by participants and the debt crises in NBFC sector.
  • Now market will focus on budget session, till then m expecting some range-bound sessions.
  • On Downside 30650-30550 will act as a strong support zone, a breakdown will lead to further downside levels.
  • We should not forget about the GAP at 30072-29480, BankNifty would try to fill this GAP before starting a new Upside rally.
  • Overall trend is still UP until BankNifty is holding, 28740-28240. We can say a trend reversal only below these levels.
  • RSI & MACD are pointing downward with negative divergence, Indication a weakness in Strength and Momentum.

BankNifty Open Interest Analysis:

  • Based on option chain data, the highest open interest stands at 31500 CE & 30500 PE followed by 31000 CE & 30000 PE. PCR of all strikes stands at 0.92 which is a neutral zone. PCR at 30800 stands at 2.03, which is acting an immediate support zone. PCR at 31000 stands at 0.56 which is acting as an immediate resistance zone. Option pain stands at 31000, giving us expiry level. Keep tracking this option pain levels. Shift in option pain will give us new level for expiry.

Weekly Option Strategy : Iron Butterfly

BankNifty Option Strategy

Possible adjustments: Breakout from 31217, shift Put Spread to sell 31000 PE & 30700 PE buys. Same as shift call spread to Lower levels after a breakdown, New position will be : Short 30900 CE & BUY 31200 CE.

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DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods.  This information should only be used by investors and traders who are aware of the risk inherent in securities trading.

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Sachin Sival is the founder and CEO of Replete Equities, an options trading company that specializes in delta hedging. A self-taught trader, Sachin has a passion for volatility trading and stock trading. Sachin loves to hone his skills by reading up on new strategies and techniques as well as taking part in industry events. In addition to being a successful entrepreneur, Sachin also takes pleasure in photography - as a hobby.

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