Strategy for next 5-6 trading sessions

Everyday new high. Last one and half month NIFTY rose more than 850 points. Practically there is no change in country, this is height of optimism backed by global economical changes.
Indian economy reported growth 5.3%, during last quarter, it is still categorized by media as the best, much better than expected (less than 5% was the expectation)  and country is on right track under Modi's regime. In fact last year in 2013 under UPA in same quarter growth was 5.2%. We are no where near 6%, manufacturing is going down. However, inflation is easing because of crude oil prices and there could be case for RBI Governor for rate cut on December 02.

There seems to lot of liquidity in market and RBI is mopping Rupee to curb the liquidity. There is huge Forex inflow by FIIs. To keep exchange rate in control against dollar, RBI has to buy Rupee. Hence, if economic growth in last quarter is as per RBI's target too, on December 2nd Mr. Raghuraman Rajan will not lower interest rate and would add to the liquidity,

Due to this sudden drop in oil demand globally and southward movement of crude prices, very soon deflation could be major problem before many developed countries than inflation. So these investors in developed countries would find safe heaven like India to invest. But our markets are not cheap. Every good stock is more than at least 20 P/E multiple and day by day investors would find it difficult to buy good stock at reasonable valuation.

NIFTY could cross 8850 in near future if it crosses 8640 in next couple of days. It should be fresh breakout. I still can not access graphs and few other technical aspects yet, but it is fair to assume, NIFTY will find some resistance near 8630-8650 level and oil marketing companies (and those companies use oil as key raw material) will continue to benefit from lowering oil prices. If there is rate cut, banking stocks will rally for sure.

So assumptions for next 5-6 trading sessions:
NIFTY will be resisted for sometime around 8640.

1. No rate cut by RBI but very dovish commentary will keep traders sentiments high.
2. Oil marketing companies and those companies who use crude oil as raw material will do well. Apollo Tyre could be one such company, crude and rubber both going down and with an improvement in auto-sell numbers, this stock could reach to 260. 
3. Cairn India will struggle for some time as global oil prices are down and exploration will be uneconomical for them, this is backed by some loan issue to their parent group.

Based on this assumptions:
Trades could be as follows:
1) Sell four NIFTY 8600 CALLs at around 130-140.
2) Buy Cain India 260 PUT at around 7-8.
3) Buy Apollotyre 240 CALL around 6-7
4) Sell Apollotyre 260 CALL around 2-3

Total loss should not be more than Rs. 12000/- on EOD basis. Work with Rs. 12000/- as stop loss for the strategy.

Disclaimer: This blog does not take any responsibility of your profit/loss

Strategy for the last trading week of the month.

Lot of positive sentiments driving investors and traders crazy. Stocks are available at multiple times of their book values and still people are buying.

Lottery trade JPASSOCIAT did not move at all.
This week I do not have an access to usual graphs and technical analysis which I would normally do before writing the blog.

However, it is very clear that rate cut is on cards. It has to happen sooner or later. China did it in-spite of problems in their economy to boost the growth.
It is also very clear that rate sensitives will be benefited by this move and traders will align their bets based on this assumption.

Keeping this thing in mind, here is the trade setup

Sell four lots of 8600 CALL of December expiration and Sell four lots of 8300 PUT of  December expiration. Total inflow will be around Rs. 13000/- and delta will be negative.
To neutralize the delta buy YESBANK 700 CALL around 10-13 and Buy RANBAXY 600 PUT around 4-5 of November expiration.

Monitor trade such that maximum loss in all four trades should not be more than 7500/- (on EOD basis), which is about 5% of your total investment (about  Rs.150,000) in these 4 trades.

As a thumb rule, in any strategy loss should not be more than 5% of total investment. Book profit in trade if total profit is above 10000-15000/- including costs.  
Exit the trades on Thursday anyway, unless NIFTY is trading around same level as that of today.

In short, enter in to below 4 trades:
Sell 4 lots of 8600 NIFTY CALLs of December expiration.
Sell 4 lots of 8300 NIFTY PUTs of December expiration
Buy 1 lot of YESBANK 700 CALL of November expiration.
BUY 1 lot of RANBAXY 600 PUT of November expiration


Disclaimer: This blog does not take any responsibility of your profit/loss

Lottery trade: JPASSOCIAT

After a descent profit so far, one can think of lottery trade for the month.

JP ASSOCIATE

NIFTY had not moved so much but JP went up more than 8%. This could be purely news based, about which, I must confess, I have no clue.
This is purely based on chart analysis.

I could see many positives here than negative.
Stock is now trading above 50 day moving average after long time.Time and again this stock is taking trend-line support and moving up in spite of not so encouraging quarterly results.
Last year, in last week of October stock was trading around same price range,one fine day crossed 50 d moving average and shot up to 48-49!
Will it do it again this year? I don't know but if your monthly profit supports then it is worth investing small amount in this lottery trade.

What are negatives? It is touching ichimoku cloud at lower end, it could be a reversal point. It is trading in overbought region. But it has already entered in to the cloud and being traded at overbought region for long time by now.

So it is worth taking risk.
Buy JPASSOCIAT 37.5 CALL near 0.60.
Investment of Rs. 4800-5000 could provide very good profit.

To recover this cost one can sell four lots NIFTY 8450 CALLs. NIFTY is trading at all time low IV, below 10. But still it is enough to get money from the market and not investing anything from the pocket.

If one decides to calculate delta of this strategy it will be positive.

Nevertheless, if NIFTY crosses 8450 on EOD basis then exit from NIFTY CALL sell positions. Once NIFTY crosses 8450, it could take another 100 point stride in no time. My stomach feeling is such a jump is long due. NIFTY is there where it was before 8 trading sessions and this is unbelievable under present bullish scenario. It must bounce, unless it fills downside gap around 8183, which is unlikely in present circumstances.

See chart attached:

In short, recommendation for next week:
Buy JPASSOCIAT 37.5 CALL near 0.60.
Sell four lots of 8450 CALLs near Rs. 50. And if your profit so far is good enough to absorb JP CALL cost then don't even think of selling NIFTY CALLs to cover the cost of JP.

If you are entering in to both trades, JP and NIFTY then always compare total profit/loss in the strategy and decide exit point.
Nowadays, I am not following stock market daily and my next post will be by next weekend.

BTW JP looks good even for long term perspective. Downside is very minimum and stock is trading much below it's book value. It could be good stock from long term investment perspective.

Disclaimer: This blog does not take any responsibility of your profit/loss.

Buy OTM PUTs of Ranbaxy, if your profit (gained so far) permits

Book profit in AXISBANK and Ranbaxy strategy.
Reduce NIFTY and INFY sell lots. NIFTY 8300 CALL sell contracts are in profit and INFY is in marginal loss.
NIFTY is continuing up trend and lot of buying by FII everyday will ensure NIFTY crossing 8450 in very near future.
Hold DishTV, It has a potential to cross 65 in cash by weekend. Anyway the trade so far is in profit, it cold go up on Monday as it closed at the highest level on Friday, backed by Sri Lanka news.
There is reasonable profit above 15 K, if someone has entered in all strategies at the same time. It is better to take profit of the table.

Due to business travel and coupled with technical issues with my computer, I may not be regular in writing the post and personally am very light on trades this month. Holding only DishTV CALL buy contract along with NIFTY 8300 CALL sell positions. That too planning to exit soon and sit on cash this month.

One can buy RANBAXY 620 PUT. Since Ranbaxy lost exclusivity, very soon stock might settle near 600. There was suddenly lot of buying with slight decrease in price on Friday, even after the adverse news. This is a typical bull market scenario and stock price absorbed all negativity to reach new highs. It might not sustain if investors take more realistic view from Monday. Now PUTs are cheap and one can make small investment in Ranbaxy PUT buying, if his/her profit permits.

Expect my posts on weekends, though I will try to inform readers if I decide to enter in to any new strategy.

Disclaimer: This blog does not take any responsibility of your profit/loss

New strategies for next 7-8 trading sessions.

NIFTY has moved phonemically in very short time and many would have missed this rally. Lot of volatility was expected and hence I stayed away from usual CALL sell strategies.

After memorable last month (thanks to DLF),  strategies are bit differently this month.
Let us analyse new strategy practically everyday and book profit/loss at end of the week or decide further course of action based on market direction then,

One should enter in all six trades together.
We should write CALLs and PUTs, gain some premium and then buy CALLs and PUTs to maintain credit balance in trading account at least to start with.

Like everybody, my general view is up, as per OI, NIFTY entered in new series with very positive bias, but I personally don't think NIFTY will go above 8490-8500 in this series.

Lot of CALLs written at higher level. Maybe some profit booking could be seen at higher level and NIFTY could see 8200 in  next 7-8 trading sessions.

 
But individual stocks could move up to find new highs. IT stocks could show slow momentum. Though Rupee is depreciating, very soon it could come near 60/- and some profit booking could be seen in IT stocks.

INFOSYS:

It is near resistance line.
May give breakout and could zoom to 4100 but should hold 4150 for temporary period.

The highest OI at 4100 and 4200 should act as strong resistance.

In short one can sell INFY 4100 CALL around 72-80 to gain premium about 9300/-
and sell NIFTY 8300 CALLs around 140/-, One can sell total 5 CALLs to gain premium about 17000/-
So you trading account will be credited by Rs. 28000-29000/-

In this money we should find stocks which could outperform NIFTY.

DISHTV:

DISHTV Stock is not doing too much in past several month. In true sense never participated in the rally.
Maybe it will do this in the last leg of the rally and has a potential to touch 65-66.

Buy DISHTV 60 CALL around 1.40

AXISBANK:
It was moving in channel for some time and gave clear breakout on October 31. Has huge upside potential.

Buy AXISBANK 450 CALL around 7.50-8.00

Ranbaxy:
Ranbaxy management is known for surprises for their dealings with USFDA. In esomprazole, to avail 180 days exclusivity they must able to launch on November 25. If they don't it could be substantial loss to Ranbaxy, analysts are expecting it could be in the range of USD 300-400 mio, which could be about 10% of total Ranbaxy's business. Drop in share price if Ranbaxy could not succeed in launching esomprazole, could be around 20% including sentimental blow from traders.
But if Ranbaxy could launch, in this bull market stock will go up to 725-730 on November 26.
As an option trader one should have positions on both sides and must hold till November 26.

Buy Ranbaxy 650 CALL around 14/- and buy Ranbaxy 6200 PUT around 12.

In short trades should be as follows.

1. Sell INFY 4100 CALL, 1 lot
2. SELL NIFTY 8300 CALL, 5 lots
3. Buy DISHTV 60 CALL, 1 lot
4. BUY AXISBANK 450 CALL, 1 lot
5. Buy RANBAXY 620 PUT, 1 lot
6. Buy RANBAXY 650 CALL, 1 lot 

Disclaimer: This blog does not take any responsibility of your profit/loss