March 30, 2020

NIFTY fell 380 points overnight... yet positional put option buyers hardly made money

- despite a 380 point fall in the nifty, put prices did not appreciate
- was this because of theta? there was no change in VIX
- note I am writing about weekly expiry options

- someone who bought 8700 PE on Friday close has earned 77 points after a 380 point fall
- and a 8300 PE has actually lost money

- let us see what happens tomorrow

Summary: do not trade options unless you know the greeks

Newbies: visit http://zerodha.com/varsity/module/option-theory/




Market outlook

Daily charts:
- trend is down on daily charts
- today nifty closed 45 in negative at 8281
- AD was 7:11

- 3 days pattern of higher high higher low got disrupted today
- there was a warning on Friday anyway

- nice swing high formed around 9000
- support 7500

March 29, 2020

Bob Farrell's 10 Rules

Bob Farrell is a Wall Street veteran who draws on some 50 years of experience in crafting his investing rules. After finishing a masters program at Columbia Business School, he launched his career as a technical analyst with Merrill Lynch in 1957. Even though Mr. Farrell studied fundamental analysis, he turned to technical analysis after realizing there was more to stock prices than balance sheets and income statements. He became a pioneer in sentiment studies and market psychology. His 10 rules on investing stem from personal decades of experience with dull markets, bull markets, bear markets, crashes, and bubbles. In short, Bob Farrell has seen it all and lived to tell about it.

Like all rules on Wall Street, Bob Farrell's 10 rules are not intended to be considered hard and fast or set in stone. There are exceptions to every rule. Nevertheless, these rules will benefit you as a trader or as an investor by helping you to look beyond the latest news headlines or your gut emotions. Being aware of sentiment can prevent traders from selling near the bottom and buying near the top, which often goes against our natural instincts. Human nature causes individual investors and traders to often feel most confident at the top of a market. At the same time, they often feel most pessimistic or cautious at market bottoms. Awareness of these emotions and their potential consequences is the first step towards conquering their adverse effects.

Read more at https://school.stockcharts.com/doku.php?id=overview:bob_farrell_10_rules


NIFTY weekly charts

- trend is down
- 5th consecutive week of lower high lower low
- resistance around 9000... 10000 is the bigger one
- no relief rally as yet
- ATR(14) around 700 (daily is 500+)

BANKNIFTY weekly charts

- trend is down
- this week is the 5th lower high lower low formation
- not once has the index closed above prev week highs
- any pullback is likely to get resisted around 24000 levels

- ATR(14) is 2200 or approx 11%


March 28, 2020

Hypothetical question

If you see a 200-foot high tsunami heading toward you on the beach, would you conclude that it is a hoax because you are still dry?

Discuss. By Scott Adams

"Social Distancing" is a privilege of the rich....not for the poor

Image

If you are alive 60 days from now, you will regret losing the equity opportunity of March 2020, says Basant Maheshwari

“The game right now is to wait for clarity, but as we have seen in the past, if you are waiting for clarity, then you will have to pay the price of clarity. People who stayed in cash in 2008 didn’t buy till the Sensex had doubled itself in 2009,” he said.

That bull run saw the emergence of multibaggers like Page Industries and Pantaloon, which surged up to 40 times in the next few years.

“In 60 days from now if we are alive, then we will regret the opportunity of March 2020. If ..

Read more at:
https://economictimes.indiatimes.com/markets/stocks/news/if-you-are-alive-60-days-from-now-we-will-regret-losing-the-equity-opportunity-of-march-2020-says-basant-maheshwari/articleshow/74824500.cms

March 27, 2020

Market outlook

Daily charts:
- trend is down on daily charts
- today nifty closed flat at 8660
- AD was 5:4

- this was 3rd consecutive day of higher high higher low
- nifty opened gap up but could not sustain at highs

- now we have various possibilities
- retest of recent lows and then breakout above 9000
- break of recent lows
- rangebound market

March 26, 2020

Market outlook

Daily charts:
- trend is down on daily charts
- today nifty closed 4% at 8641
- AD was 13:5

- VIX dropped 8% to 71

- I think we are seeing bear market rally or technical pullback
- this will not be a time to start investing (except SIP in mutual funds)

- resistance 10000

Stocks which have corrected the least in 30 days

NIFTY 50



NIFTY Next 50



- buy strength not weakness
- buy when stock makes a 52 week
- risk per trade under 1%
- define SL before taking position

March 25, 2020

Market outlook

Daily charts:
- trend is down on daily charts
- today nifty closed 7% in positive at 8318
- AD was 11:7

- VIX down 8%

- 14 day ATR is 535
- swing highs (very approx) is at 9000, 10000
- no technical pullback/ relief rally seen in this correction so far
- the first buy signal will fail.

DJIA chart: 1929 and 2020 comparison/ fractals

Draw your own interpretation

Image

March 24, 2020

Market outlook

Daily charts:
- trend is down on daily charts
- today nifty closed 2.5% in positive at 7801
- AD was 4:5

- VIX jumps 14% to 82
- intraday high was 86
- evidence of bottoming out would be huge drop in VIX
- as of now this is not happening

NIFTY PE and PB ratio in 2008

The current PE is 17 and PB ratio is 2.17

Feel free to draw your own interpretations



March 23, 2020

NIFTY monthly charts with 2008 and 2020 correction

Linear scale:
- the 2020 correction looks bigger than the 2008 correction
- it is not



Log scale:
- the 2008 correction so far is bigger than the 2020 correction



Use Google to know the difference between Log and Linear scale... don't ask me

What the 2008 correction looked like

- the 2008 correction saw a 50% drop in nifty
- so far nifty has corrected only 30%
- but this fall has happened in a month's time
- whereas the 2008 correction last a full year

- the correction looks slow/ manageable but percentage damage was much more

Market outlook

Daily charts:
- trend is down on daily charts
- today nifty closed 13% in negative at 7610
- AD was 1:17

- nifty is month to date down by 32%
- this is clearly a record

- swing high dropped from 11500 to 10000 to 9000
- dotted lines are plotted

- ATR is 525 points or 7%
- anyone following ATR based SL has to keep min SL 1050 points

March 22, 2020

The Gambler by Kenny Rogers - must listen for all stock market traders

Kenny Roger, best known for his song "The Gambler" passed away recently... here is the song with lyrics and a must listen for stock market traders

Why this ongoing crash is unique and unlike the 2008 crash