Dalal Street Week Ahead | Stocks and Commodities

October 17, 2017
Time: 12 Noon


Dalal Street Week Ahead:

1. Our markets closed positive for the last three weeks.
2. Global markets also closed for the last three weeks.
3. Nifty is trading in the top end of the trading range which I mentioned in my "October Outlook".
4. Nifty was expected to trade between 7500 and 8300 in October series.
5. Now Nifty is closer to 8250, we still have 8 more trading sessions.
6. On Friday evening Reliance has declared very good results, people expect 3 to 5% gap up on Monday morning.
7. Since Reliance is a index heavy weight, Nifty is likely to move higher due to to Reliance.
8. Though Technical analysts predict that Nifty will touch 8400, that may not happen without a small correction.
9. So it is time to be careful with long positions.
10. In my view Nifty will trade between 8100 and 8400 next week.
11. It is truncated week, Thursday is a holiday.
12. Monday morning China will declare its GDP data and Manufacturing data.
13. Any positive or negative surprise will affect the global markets.
14. Highest open interest among Puts is at 8000 and highest open interest among calls has been shifted from 8200 to 8300 as I have mentioned earlier.

Trading Strategy:

1. Bank Nifty started at 17200 and has never gone below it in this series.
2. So one can consider selling 17000 Put option which is trading around Rs 47.
3. There are only 8 trading sessions and this works out to be nearly 10% return for the Span margin paid. This is a reasonable bet.
4. Even if there is any correction, Bank Nifty will find very good support first at 17500 and then at 17200.
5. At the same time, August 24 gap down fall has been filled.
6. So the upside from here will be very limited.
7. So one can consider selling 19000 Call option which is trading around Rs 30.
8. So one can get more than 5% return in two week time by selling both 17000 Put and 19000 Call in Bank Nifty.
9. Nifty took very good support at 8100 in the last few trading sessions.
10. Highest open interest among Puts is at 8000.
11. So even if there is correction, Nifty will first take support at 8100, then at 8000.
12. So one can sell 8000 Put option which is trading around Rs 18.
13. At the same time, even bullish technical people also talk of 8400, nobody is talking about 8500.
14. Since the Nifty has already up by 350 points in this series, the upside will be very limited.
15. So one can consider selling 8500 Call option which is trading at Rs 10.
16. So by selling 8000 Put and 8500 Call one can collect a premium of Rs 700 per lot for which gives a return of more than 5% for the Span margin paid. 

DISCLAIMER

The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Readers are advised to consult their Financial consultants before taking any position. The analysis is partially Technical and partially Fundamental. The views expressed are the Author's own views.