Pre Market report (21-07-2020)

Global cues:

 

•       The S&P 500 and Dow indexes opened lower on Monday as concerns about a jump in COVID-19 cases curbed risk appetite.

•       Coronavirus-related stocks were active in early trade. AstraZeneca and Oxford University said their vaccine candidate showed promise. Moderna dropped 14% after the news.

•       India is seeking concessions for generic drugs it exports to the U.S. in return for opening its dairy markets in the U.S. in a new trade deal.

•       Asian are in green, Dow futures are positive.

•       SGX Nifty is up by 100 points. Expect huge gap up opening in our markets today.

 

Indian markets:

•       Nifty closed at a 4-month high since March 5. Crosses 11000.

•       The FMCG stock hit its 52-week high and remained the top gainer for the Nifty50 index.

•       IT, Reliance and financials led the rally.

•       FIIs were net buyers of worth Rs. 1709.97 Cr and DIIs were net sellers of worth Rs. 1521.99 Cr.

•       Barring pharma index, all sectors closed higher, with Nifty IT ending over 3%.

•       M&M Finance surges over 10% after management's comment on rights issue.

•       Telecom stocks were in focus amid the AGR hearing in the Supreme Court in the last hour of the trade. Vodafone Idea witnessed a highly volatile session and ended flat at Rs 8.95.

 

 

Trends:

•       The index formed a small bullish flag pattern on the intraday chart & broke out on the upside towards the end of the session.

•       The long term charts like weekly and monthly timeframe indicate a stretched upside momentum in the market and they signal a chances of sharp turnaround in Nifty from the higher levels. Hence, one needs to be cautious of long positions at the highs.

•       The short term trend of Nifty continues to be positive. One may ride the uptrend and continue long trading positions with a stoploss.

 

Options strategy for Today:

 

•       If there is a flat or gapdown opening in Nifty or Bank Nifty, market may go up or go down, but there is more chance for it to go down since people will go for profit booking.

•       But, if there is a huge gap up then Market may be rangebound for a while before showing any trend.

•       Bank Nifty is weaker compared to Nifty.

•       Nifty’s expected range tomorrow can be 11000 to 11200.

•       Downside support is at 11000 & 11050 levels.

•       Upside resistance is at 11150 & 11200 levels. 

•       Maximum call OI of 27.01 lakh contracts was seen at 11,200 strike which will act as crucial resistance for tomorrow.

•       Maximum put OI of 12.92 lakh contracts was seen at 11,000 strike which will act as crucial support for tomorrow.

•       The good part is that with most of the negatives priced in, the economy is opening up, there are hopes of a vaccine, the global market is looking up and the dollar index has started to correct suggest that chances of a breakout are much higher, and if that happens, we could well move in the 11,000 territory.

Stock Picks For the day:

•Apollo Hospital broke its resistance level. Stochastics show that the stock is under bought and expect the stock to move up to 1,510 levels.

•HDFC Bank ADR was around 9% up expect the stock to swing upwards due to high buying in the early hours of trade. Expect the stock to test 1,165 levels.

•ICICI Bank ADR was around 6.5% up expect the stock to swing upwards due to high buying and with results around the corner. Expect the stock to test 385 levels.

•NALCO has shown a weak structure on Monday with a doji formation in the last 30 mins of trade expect the stock to slide down to 33.2 levels.

Option Strategy for the day (Learning)

Bull Put Spread (With Example of Nifty)

•View: Moderately Bullish (we expect Nifty to increase a little)

•Implementation:

•Buy 1 Out-the-money put option

•Sell 1 In-the-money put option.

Take Nifty current price : 7805

Buy 7700 Put option (OTM) @ 72rs premium (Pay 72)

Sell 7900 Put option (OTM) @ 163rs premium (Get 163)

We will get net 163-72 = 91rs premium

Now let's take 3 scenarios

1.Nifty expires at 7600

7700 PE would be Rs100, but we paid 72rs premium, so net is 28Rs profit

7900 PE would be Rs300, we had got 163rs premium, net is 137rs loss

Net payoff is : 28-137 = 109 loss

2. Nifty expires at 7700

7700 PE would be zero, net = 72rs premium loss

7900 PE would be 200rs, net = 200-163= 37rs loss

Net Payoff : 72+37 = 109 Loss

3. Nifty expires at 8000

Both 7700 PE and 7900 PE would be 0

So net payoff would be our 91rs premium as profi.

As we can notice,

The Max Profit and Max Loss is limited, so the risk is managed at all times regardless of the expiry price.

The Breakeven point lies somewhere between 7700 and 7800

In the above table, you can check the payoff at all expiry prices. Notice our profit stays the same @ 91 even if the Nifty goes as high as 8500.

Disclaimer

 

Please note that all the recommendations/views/ levels we provide are based on the theory of technical/fundamental analysis and personal observations. This does not claim for sure/ certain profit or any fixed returns. we are not liable for any losses you make on the given takes and levels. You are advised to take your position with your sense, discretion, and judgment. only you would be responsible for outcomes of your trades

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