Nifty Detailed View --- Invest Here or Repent Later - 2

The second point we needed to bring in focus is also given below ( please read previous post before reading this ):

As we have seen in the past and as this chart shows after making a low of 2500 in March 2009 we have not corrected more than 16.5 % in any of the major falls we have seen in past 2 years.

First Correction ->  June - July 2009 - 16.5 %
Second Correction -> Oct - Nov 2009 - 12.6%
Third Correction -> Jan - Feb 2010 - 12.4 %
Fourth Correction -> May - June 2010 - 11.6%
Fifth Correction ( the current one ) - From Nov 2010 - till now. We have already lost around 15% from the highs, considering history repeats itself and we somewhere bounce back from 16.5 % level again which again coincides with our Multiple support Rectangle zone of 5150-5350

Regards

Ankit

Nifty Detailed View --- Invest Here or Repent Later - 1

Nifty Detailed View:

Last time when we talked about Multiple Support Zone -->> 5550 to 5650 ( refer post on 11 th Jan ) , Nifty took 3 times support from this support zone before breaking it finally.

Now after correcting almost 1000 points from the Top the view is given below ( attached with a chart ): 

5350-5150 --> It wont be a easy task for Bears to break this support zone because of the following reasons:

1) Multiple bottom formations around 5350 during July - Sept 2010
2) Solid Trendline support ( lower end of the long term channel ) @ 5150-5200 joining major bottoms formed in Nov 2009 , Feb 2010, May 2010.
3) Minor support around 5200-5300 as Nifty consolidated in this range in the month of June -July 2010 before finally giving a breakout.

A bounce is for sure from the Multiple support rectangle but it is difficult to say this bounce will turn into a Major Bottom or it will be retested again ??

If this support zone ( 5150-5350 ) is broken on closing then expect Nifty to go back from where it started to 4800-4900 which is 61.8% level of the entire rally from 2500 to 6300.

 

Trade Wisely

Regards

Ankit

Nifty -- Option Strategy

Strategy – Covered Call


We expect Nifty to find support @ 5350-5400 and a pull back is seen to 5650-5700 odd levels, though a sustained move above 5700 would be a difficult task. We recommend a Covered Call Strategy where one needs to Buy 1 lot of Nifty Feb 5500 call @ 87 and Sell 1 lot of Nifty Feb 5700 call @ 27.



Recommendation:



Long/Short Option Type Expiry Strike Price Premium Quantity

Long Call Feb – 2011 5500 87 50

Short Call Feb --2011 5700 27 50



Breakeven Points:

Decider Level : 5560

It means loss is incurred only if Nifty closes below 5560 on expiry of Feb month i.e. Till Nifty stays above 5560 this strategy would be in profit



Risk/Reward:

Max Profit: 7000/-

Max Loss: Limited ( Premium paid = 60 points = 3000/- per lot )

Investment: 33350 ( Margin of 1 lot of Nifty ( 29000 ) + Call premium paid ( 5700 strike ) )

RETURNS: Upto 20.98%

Upto 251 % ( ANNUALIZED )



Traders can keep a stoploss of 5350 on closing basis on Nifty, it is advised to exit this strategy with a minimal loss if Nifty breaches 5350 on closing basis

Have a nice trading day

 

Regards

 

Ankit