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Trade and Investment Setup for October 1 - Plans and Results

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I have started actively trading and investing in the Equities and Futures and Options markets. This is a simple journal of what I do and why. The format will be simple.

I will jot down my points during the start of the day and make some plans. 

During the day, (when the market opens), I will execute them.

After the market ends, I will note down my observations and see where we stand and how far the strategies worked and why.

Disclaimer: This is my personal journey. I am not a financial advisor of any sort, so copying my trades or scrips is NOT recommended.

Background

After rallying almost 1200 points, Nifty finally showed some weakness and and has come down from the highs of 17950 to 17600. That is a big fall.

I see a few major problems: 

  1. US bond yields are getting higher. Source
  2. There is an ongoing energy crisis ongoing. Coal is in short supply, gas stations are running dry.
  3. Monthly expiry was on September 30. This led to a lot of positions closing. Ok. This was a minor point.
  4. FIIs have sold drastically. They have pulled out almost 1900 crores on Thursday while DIIs have bought about 90 crores.
  5. Evergrande crisis
  6. Delta variant is still a threat in the US
  7. US Markets are also significantly lower than yesterday
There are a few pros:
  1. NIFTY has been falling for 3 days straight. RSI has eased off. I don't care much for technical indicators though. Human psychology works differently.
  2. Massive fall was observed in NIFTY and BANKNIFTY yesterday and that was monthly expiry. Trends suggest there could be a rally today.
  3. Retail buying remains strong in India.
  4. Festive season is approaching and October  to November has traditionally been good for Indian markets.

Let us see the situation in NIFTY


Long term - we are good. So, let us look at the short term cues.

As can be seen from the chart above, there is a stiff resistance at 17650 to 17700. On the downside there is a support at 17300 levels. After that the next support is at 17000.

Since SGX NIFTY is falling since the morning (AGAIN), it is safe to assume that NIFTY will open gap down and still fall further. So I will go long only with put options. I think 17800 PE can be safe. I will see at 9:15 AM where we stand. Selling 17700 CE is also great and most certainly safer.

Let us check BANKNIFTY



Here as well, I don't see anything easing for the Banks in the short term. The upper resistance stands around 37900. I don't think it will go there today.

The support is at 37300 and lower at about 36500. These are not encouraging signs. 

Going long OTM is risky.

I may still go with 37300 PE or short 37500 CE.

Let's see how these strategies work out today.

Verdict

The gap down was massive in both NIFTY and BANKNIFTY and the general trend was downward.

But, in NIFTY going long on PUT options would have been bad.

Selling 17700 CE was fine. This would have been safer.

Same with BANKNIFTY. Buying a PUT option would not have done you wonders, unless you scalp. But selling a CALL option would have netted you good profits for the day.

A lot of Large Caps were available at a discount. Apart from that, there was nothing to note in particular.

In the end, I would say the results were mixed. Writing is generally better so this is not very surprising either. I would rate my results about 40% for the day since I personally ended with minor to moderate losses though my general prediction was not off.

I guess I lack confidence and conviction, here's hoping to gain it soon.

Thanks for reading. See you on Monday.

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