Pre Market Report (23-07-2020)

Global cues:

•  U.S. stocks rose on Wednesday as a boost from technology stocks.
• Investors are optimistic about a round of financial stimulus.
• Earlier on Wednesday, futures took a hit after Washington told China to close its consulate in Houston, citing a need to protect American intellectual property and information.
• Asian markets are mixed, Dow Futures flat.
• SGX Nifty is slightly higher, expect flat opening.

Indian markets:

•     Nifty snapped its 5-day gaining streak and closes flat on Wednesday

•     Nifty was majorly dragged by selling in IT, auto and state-run lenders.

•     Reliance Industries closes at record high; stock above Rs 2,000/share for the 1st time

•     FIIs were net buyers of worth Rs. 1665.57 Cr and DIIs were net sellers of worth Rs. 1138.83 Cr

•     All the sectoral indices were trading in the red except pharma and media index.

•     M&M Finance gains for 5th consecutive day after the announcement of the rights issue.

•    Gold prices in India hit a record high of Rs 50,000 per 10 grams on the MCX following a rally in international spot prices that rose to highest in nearly nine years on hopes of more liquidity stimulus and a weaker dollar.

•     SEBI confirms that mutual funds will have to start doing at least 10% of their total secondary market trades by value in the corporate bonds on the exchange platform.

Trends:

•    Nifty formed a bearish candle that resembled a 'Hanging Man' pattern on the daily chart. It also negated the higher low formations after four straight sessions, indicating supports were shifting lower.

•    A formation of a 'Hanging Man' pattern suggests the uptrend is about to end. But for the signal to hold true, follow through selling is required in the next session.

•    The options data continued to indicate that the Nifty could remain in an immediate trading range of 10,800 to 11,300.

Option strategy for tomorrow:

•       Nifty is expected to be rangebound before making any move.

•     If Nifty opens flat or gap-down it may go on the selling side, but one should short only if the market sustains 11100 levels.

•     If there is a gap-up market canl be choppy and rangebound for most of the session before making any trend.

•     Bank Nifty is a sell only below the 22600 levels.

•     Nifty’s expected range tomorrow can be 10550 to 10830.

•     Upside resistance is at 11200 & 11270 levels.

•     Downside support is at 11080 & 11140 levels

•     Maximum call OI of 34.12 lakh contracts was seen at 11,200 strike which will act as crucial resistance for tomorrow

•     Maximum put OI of 37.93 lakh contracts was seen at 11,000 strike which will act as crucial support for tomorrow

•    Confirmation of reversal pattern at the highs is likely to trigger a selloff in the market. Any short-term upside bounce from here on could find resistance in the 11,250-11,300 zone

•    Traders should avoid long positions and positional traders with a high-risk appetite should consider shorts if the Nifty trades below 11,000

Stock Picks For the day:

• Bharath forge has seen strength in the last hour. And is currently at the resistance level. It may see 387-390 levels of resistance is broken.
• Lupin has been seeing downtrend continuously now. Stock can see 825 levels tomorrow.
• Infosys is a sell at current levels. The stock also formed a strong bearish candle yesterday after touching its all-time high after results. Can expect 900 levels.
• Reliance is a sell. The stock touched it's 52 weeks high and a round of profit booking was seen. The stock might consolidate before the upcoming results.

Options Strategy for the day (Learning)

Bear Call Spread (With Example of Nifty)

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

Implementation:

1.   .  Buy 1 In-the-money Put option

2.      Sell 1 out-the-money Put option 

Take Nifty current price: 7222

Buy 7600 PE option (ITM) @ 165rs premium (Pay 165)

Sell 7400 PE option (ITM) @ 73rs premium (Get 73)

We will pay net 165-73 = 92rs premium

Now let's take 3 scenarios

1..Nifty expires at 7800

Both Put options will be zero

Net payoff = 92rs Premium loss

2. Nifty expires at 7600

Both Put options will be zero

Net payoff = 92rs Premium loss

3. Nifty expires at 7400

7600 PE would be Rs200, we paid 165 earlier, net = 200-165 = 35rs profit

7400 PE would be zero, we had got 73 as premium

Net payoff = 35 + 73 = 108rs 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 7400 and 7500

In the above table, you can check the payoff at all expiry prices. Notice our profit stays the same @108 even if the Nifty goes as low as 6600.

Results on July 23

HDFC AMC, Biocon, PNB Housing Finance, Sterlite Technology, Agro Tech foods, Foseco India

Source: moneycontrol

 

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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