Pre Market Report, July 11, 2016 | Stocks and Commodities

July 11, 2016
Time: 8.30 am

Pre Market Report:

1. US markets closed significantly higher on Friday after fantastic jobs report.
2. So Asian markets are all trading firmly in Green.
3. SGX Nifty is trading around 8440.
4. This is more than 100 points higher than Friday's close.
5. This is a huge gap up, particularly since the markets have been trading with negative bias for the last three to four trading sessions.
6. There will be significant short positions as markets started correcting after a huge rally.
7. Since the Nifty future is opening gap up, higher than the high reached on July 4 (that is 8415), all short sellers will have to run for cover.
8. Results season is starting with a big bang, we need to see whether IndusInd Bank live up to the expectation.
9. Reports on Monsoon progress has been very impressive.
10. 89% of the country has received normal or above normal rainfall.
11. The next big trigger will be next week, the results from key companies and the most important bill, GST.
12. Highest open interest among Calls is at 8500.
13. It looks like that will be taken out this week.
14. In that case the next highest open interest is at 8700.
15. I have been saying that 8700 is the target for this series, if GST, Monsoon and Corporate results all fall in line.
16. For the first time, I bought options in huge quantities.
17. I have bought Nifty 8500 Call, Bank Nifty 18300 Call in weekly options and 19000 Call in Monthly options.
18. But one has to remember that time value will always be against the buyer.
19. So markets should move significantly higher in a short period of time to make money in buying of options.
20. Luckily that is happening today.
21. So either one should book profit in 'Buy Options' or should put strict stop loss.
22. There are some plus and minus in both cases.
23. In case of keeping stop loss, the big positive is that we can continue to gain immensely if Nifty keeps moving higher.
24. On the other hand, there are two negatives, (a) if the markets are volatile, stop loss will be hit. In this case, you will still make profit but less profit. This is actually OK kind of situation.
25. (b) In case, stop loss is not hit, you carry the positions, in case in the near future, if the markets open with huge gap down, for one or the other reason, your stop loss will not work and you may lose more.
26. In my case, I am planning to book profit partially and carry the remaining.
27. How much partially I will be booking profit?
28. I will be looking to sell so that I will recover my cost, say for example, Bank Nifty 19000 Call, I bought for Rs 22, if that moves to Rs 44, I will sell half of my positions, if that moves to Rs 88, then I will sell one fourth, etc, so that I will take back the money that I paid.
29. So for the remaining positions, my cost is Zero.
30. So I will continue to hold the remaining positions and if Nifty reaches 8700 as expected I will be extremely lucky.
31. IndusInd Bank will be in focus ahead of its results.
32. PNB will be in focus as FII limit is increased.
33. L&T will be in focus as L&T Infotech IPO opens today.
34. Tata Motors will be in focus due to healthy sales figures for JLR division.
35. RCom will be in focus as promoters have pledged sahres worth Rs 190 crores.
36. Rel Capital, Rel Infra, R Power will see collateral damage.
37. Since the markets are too bullish the damage may be very limited.
38. Chemical companies will be in focus due to anti dumping duty from 4 countries.
39. Nifty future will face resistance at 8480.
40. Support will be at 8415, July 4th high.