Pre-Market Report (24-07-2020)

Global cues:

•  The S&P 500 struggled for direction on Thursday, following four straight days of gains.
•       Investors held out for a new coronavirus relief package, with latest data showing signs that a recovery in the labor market was stalling.
• The monetary taps are on and are likely to remain so while unemployment is high, and this should continue to support markets.
• SGX Nifty is down 101 points, so expect a huge gapdown on our opening market.

Indian markets:

•       Nifty was back in the green on Thursday after a day of pause

•       Reliance contributed 44 points to Nifty's gain of 83 points.

•       FIIs were net buyers of worth Rs. 1740.50 Cr and DIIs were net sellers of worth Rs. 931.91 Cr

•       Except IT, all indices ended higher; pharma & energy top gaining indices.

•       RIL surged to record high with market cap rising to Rs 13 lakh crore

•       Rossari Biotech makes a strong debut; closes at Rs 752 v/s issue price of Rs 425/share.

•       Shares of Future Retail were locked at 5% lower circuit after the company said that it had missed the payment due to dollar bonds due to the stressed liquidity position.

•       PNB Housing Finance share jumped 5% after the company posted 9.5%fall in its YoY consolidated net profit for the June quarter.

•       Gold crosses Rs 51,000 mark.

Trends:

•       After a sharp up-move in the first half, the market spent a major part of the second half in a sideways trajectory. However, the last hour of the trade saw further improvement and Nifty managed to end near its high point.

•       Expiry of the weekly options evidently dominated the trend.

•       While the market remains mostly overbought, it is not showing any sign of giving up despite range-bound sessions on an intraday basis.

•       Also, restrictions on short selling has been extended till august 27^th, which would further give markets the impetus to move to higher levels.

•       The current technical structure shows although there are no sign to indicate weakness, the market is a bit overstretched at this juncture. This would mean Nifty may continue to inch higher and make incremental highs, but all such up-moves may remain capped and vulnerable to selloffs at higher levels.

•       Any corrective move will make the trading range wider than usual. We recommend approaching the market with caution, while avoiding excessive long exposure at current levels. Guard profits at these levels.

Option strategy for tomorrow:

•       Nifty’s expected range tomorrow can be 11100 to 10350
•       If Nifty opens flat or gapup wait for the trend and make positions. If market goes up can buy call option. If market goes down then can buy put option.
•       If there is a gapdown.then there is more chance for the market to go down.
•       Downside support is at 11100 & 11060 levels.
•       Upside resistance is at 11220 & 11300.
•       Maximum call OI of 41.52 lakh contracts was seen at 11,350 strike which will act as crucial resistance for tomorrow
Maximum put OI of 41.72 lakh contracts was seen at 11,200 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 3.8% down expect the stock to bounce back to 465 levels with the stock being in oversold category on stochastics oscillator

•NALCO showed a Doji formation for the last 30 mins with some weak structure in the stock. Expect the stock to slide down to 33.6 levels

•ICICI Bank showed some strong structure in the last 30 mins of trade on Thursday. Expect the stock to reach to 400 levels in the early hours of trade with Q1 results around the corner

•RIL is currently trading 2,057 levels. The stock showed strong bullish candles in the last 15 mins of trade with talks of Amazon buying stake in the retail business. Expect the stock to test 2,080

Options Strategy for the day (Learning)

Long Straddle (With Example of Nifty)

•View: Large Movement (we expect Nifty move to make moves either up or down)

•Implementation:

• Buy 1 Put option
• Buy 1 Call option 

Take Nifty current price : 7579

Buy 7600 CE option (ATM) @ 77rs premium (Pay 77)

Buy 7600 PE option (ATM) @ 88rs premium (Pay 88)

We will pay net 77+88 = 165rs premium

Now let's take 3 scenarios

1.Nifty expires at 7200

7600 CE would be zero

7600 PE would be 400rs

Net payoff = 400-165= 235 Premium Gain

2. Nifty expires at 7600

Both options will be zero

Net payoff = 165rs Premium loss

3. Nifty expires at 8000

7600 PE would be 0

7600 CE would be 400

Net payoff = 400-165 = 235rs profit

As we can notice,

The 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 7700

In the above table, you can check the payoff at all expiry prices. Notice our profits can go unlimited on either side. 

 

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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