Pre Market Report (22-07-2020)

Global cues:

 

• All three indexes moved higher on Monday, with the Nasdaq leading the way at 2.5%.
• Promising early data from trials of three potential vaccines helped the S&P 500 close in the green for the year on Monday.
• The S&P 500 and the Dow indexes rose on Tuesday because of positive earnings reports from companies including IBM and Coca-Cola, and on optimism over a vaccine and fiscal stimulus for the economy.
• The U.S. government has less than two weeks to agree on a legislative package before additional unemployment assistance runs out for tens of millions of Americans.
• Asian Markets are flat with negative bias and dow futures is trading flat.
• Sgx nifty is flat, Expect flat opening in our markets as well.

 

Indian markets:

• Nifty was high for the fifth consecutive session led by banks and auto stocks on Tuesday. Sentiment was positive also because of trial data of three vaccines.
• FIIs were net buyers of worth Rs. 2265.88 Cr and DIIs were net sellers of worth Rs. 727.39 Cr.
•  Barring pharma and FMCG indexes, banking & financials rose the most, over 2% followed by realty, media and auto index.
•  Mindspace REIT IPO to open on July 27, price band fixed at Rs 274-275.
• SBI Cards stock price surged over 5% to hit a 52-week high after reporting a 14% rise in net profit and a 20% increase in credit cards during the quarter.

 

 

Trends:

• The index closed above 11,150 levels and formed a bullish candle on daily charts.
• Intraday trading range remained extremely narrow for the second session in a row with 66 points, which can be a cause of concern.
•  As the session progressed, more stocks slipped into the negative territory, hinting at stock-specific profit-taking, though at the end of the session, the bulls still remained in an advantageous position with a positive advance-decline ratio.
• Call writing was seen in 11,600 and 11,500 strikes, while meaningful Put writing is seen at 11,000 and 11,100 strike.
• The Nifty seems to be near the overbought zone, so profit-booking would be the right strategy, though the bulls remain in a strong position.

 

Options strategy for Today:

•       Tomorrow market is sell on rise type of market.

•       There is a good chance that market will consolidate ahead of its expiry and has been ending with positive gains over last 5 trading sessions. So people will look for profit booking.

•       Bank Nifty is weaker compared to nifty.

•       Nifty’s expected range tomorrow can be 10960 to 11250

•       Upside Resistance is at 11160 & 11220

•       Downside support is at 11100 & 11040 levels.

•       Bank nifty is sell at 23000-23100 levels..

•       Maximum call OI of 26.79 lakh contracts was seen at 11,200 strike which will act as crucial resistance for tomorrow

•       Maximum put OI of 31.92 lakh contracts was seen at 11,000 strike which will act as crucial support for tomorrow

Stock Picks For the day:

•Axis Bank Q1 profits fell by 19% YoY. The stock closed 2.8% up with last half an hour of trade  on Tuesday expect the stock to open with gap up and may see selling pressure after inital hour.

•Indigo showed a formation of bearish pattern closing in red for 3rd consecutive day. The stock has shown bearish trend and is well below its 30 day moving average. Expect the stock to test 949 levels tomorrow

•ICICI Bank ADR was around 6% up expect the stock to swing upwards due to high buying and with results around the corner. Expect the stock to test 385 levels

•RIL opened gap up on Tuesday. Expect the stock to slide 1,958 levels with the stock being in an oversold condition

Option Strategy for the day (Learning)

Bear Call Spread (With Example of Nifty)

•View: Moderately Bearish (we expect Nifty to decrease a little)

•Implementation:

•Buy 1 Out-the-money Call option

Sell 1 In-the-money Call option 

Take Nifty current price : 7222

Buy 7400 CE option (OTM) @ 38rs premium (Pay 38)

Sell 7100 CE option (ITM) @ 136rs premium (Get 136)

We will get net 136-38 = 98rs premium

Now let's take 3 scenarios

• 1.Nifty expires at 7500

7400 CE would be Rs100, but we paid 38rs premium, so net is 62Rs profit

7100 CE would be Rs400, we had got 136rs premium, net is 264rs loss

Net payoff is : 62-264 = 202 loss

• 2. Nifty expires at 7400

7400 CE would be zero, net = 38rs premium loss

7100 CE would be 300rs, net = 300-136= 164rs loss

Net Payoff : 38+164 = 202 Loss

• 3. Nifty expires at 7100

Both 7100 CE and 7400 CE would be 0

So net payoff would be our 98rs premium as profit

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 7100 and 7200

In the above table, you can check the payoff at all expiry prices. Notice our profit stays the same @ 98 even if the Nifty goes as low as 6600.

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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