In today’s blog, Nitin Murarka will share important points on how to predict the overall long-term view of the market. Understanding the three types of trends is crucial: the intraday trend, the week on week trend, and the slightly longer-term trend. Knowing these trends will enhance intraday trading performance. For intraday analysis, PCR data is commonly used. Predicting where Nifty will go in the future requires a deeper understanding of market analysis.
We’ll use a top-down approach, starting with the American market as the leader of the financial markets. To gain insights into the American market, we’ll closely track the Nasdaq index, which comprises 100 major shares, including significant IT and financial stocks. Nasdaq represents the American market more clearly than the Dow Jones, which has only 30 stocks, or the S&P 500, which may introduce over-diversification.
By analyzing Nasdaq’s monthly, weekly, and daily charts, we can better understand the overall trend. The top-down approach ensures we focus on the essential indicators and avoid getting bogged down by too many indexes. This simplifies the analysis and aids in predicting the Nifty’s future trajectory more effectively. Now, let’s delve into some tricks regularly used for this analysis, which can be immensely beneficial in making well-informed investment decisions.
To do this, we are looking at five key factors: Nasdaq chart, Nifty chart, Bank Nifty chart, India’s VIX (volatility index), and the S&P 500 VIX for the American market. Starting with Nasdaq, we are examining the daily, weekly, and monthly charts to gain a broader perspective.
In the daily charts of Nasdaq, we can observe a correction for the past 4-5 days, indicating a short-term market decline. However, since our analysis is for a longer-term view, we shift our focus to the weekly charts. Here, we notice a red candle, signaling a possible reversal after the recent rise.
Zooming in on the monthly chart of Nasdaq, we find a crucial development. The market had a breakout in the previous month, with Nasdaq reaching around 13,200 points. But in the current month, the index has experienced a correction of 1,000 points, indicating a shift in the market sentiment.
As we progress, it’s important to consider the interplay of these factors for predicting the Nifty’s future trajectory. Analyzing the correlations between Nasdaq, Nifty, Bank Nifty, and India’s VIX can provide valuable insights into overall market trends.
Remember, mastering these tricks will empower you to conduct your own analysis and make well-informed investment decisions in the long run. By keeping an eye on the Nasdaq, Nifty, Bank Nifty, and India’s VIX charts, you can stay ahead in the ever-changing financial landscape.
In the current analysis, we are closely observing the monthly charts of Nasdaq and its potential implications for the market. If the current month’s closing happens on the lower side after forming a tail, it could be indicative of a monthly reversal and a signal of caution. While this doesn’t confirm a downtrend, it suggests a higher probability of profit booking or correction in the coming month.
Considering the present scenario, we advise caution when investing in IT stocks like TCS, Infosys, and Wipro in the Indian market, as Nasdaq, being the leader index with significant IT stocks, is showing signs of profit booking.
For those interested in investing in US stocks from India, it might be prudent to wait and not buy at the moment. With a clear monthly reversal in Nasdaq’s charts, there is a likelihood of a 4-5% correction in the US market, which could translate to a 3-4% correction in the Indian market.
To further corroborate our analysis, we compare the S&P WIX, an indicator of volatility in the American market, with the Indian WIX. Currently, S&P WIX shows a weekly downtrend, suggesting a positive market sentiment. However, a green weekly candle in the future could indicate caution, signaling a potential shift in the market direction.
A red candle in S&P WIX indicates a positive trend in the American market, while a green candle signifies caution. Presently, we notice a weekly green candle in S&P WIX, which adds to the signs of caution we saw in Nasdaq’s monthly chart, suggesting a potential correction in the US market.
Now turning our attention to the Indian market, we analyze the Nifty’s monthly and weekly charts. In the weekly chart, we observe the Nifty approaching a resistance level, and a correction has ensued from that point. Considering the technical analysis of support and resistance, the Nifty might experience a retracement of around 38% to 50% of its recent move.
Based on our analysis of the world market, particularly Nasdaq and S&P WIX, along with the Nifty’s current technical indicators, it is prudent to exercise caution in the Indian market. A potential correction towards 16,870 or 16,650 levels may be expected.
As the market dynamics can change, we continue to closely monitor the charts and provide timely updates in our future blogs. By staying informed and mastering these analysis techniques, investors can make well-informed decisions in the ever-changing market landscape.
After analyzing the charts, it appears that the Indian market is showing signs of weakness. The Nifty has encountered resistance at the weekly level, and a retracement towards 16,900 or even 16,600 seems likely. Based on Fibonacci retracement levels, a minimum 38% retracement suggests a target of 16,900, while a 23% retracement points towards 17,250. Thus, for the next weekly expiry, a cautious approach is recommended, and investors can consider trading in put options instead of calls.
To enhance safety and risk-reward ratios, traders may opt for bearish spreads. One strategy involves buying a put option of 17,500 and simultaneously selling a put option of 17,300, financing the trade. This approach can provide a cost-effective way to benefit from the anticipated market correction while minimizing potential losses.
As always, mastering these analysis techniques can empower investors to make more informed decisions and navigate the market’s fluctuations effectively. By staying updated on the global market, monitoring key indicators like Nasdaq and S&P WIX, and conducting thorough technical analysis, traders can strategize and trade with greater confidence.
Absolutely, looking at the data and chart analysis, it’s prudent to adopt a cautious approach in the market. It’s not necessarily predicting a highly negative scenario, but being aware of potential profit booking and market corrections. As traders and investors, we must keep a close eye on our portfolios, maintain tight stop losses, and exercise caution while trading in the September expiry.
Analyzing Bank Nifty is also crucial as it contributes significantly to the Nifty’s movement. Though Bank Nifty is showing resistance, a correction in this index could lead to further profit booking in the overall market.
Turning our attention to India’s WIX, it serves as an indicator of market fear and volatility. The recent bounce from support and the possibility of WIX rising to 22-23 suggests that fear is increasing in the market. Higher WIX levels often coincide with market declines, indicating a potential fall in the Nifty towards 17,300-17,200.
In our SMC Global’s premium index trading group, with CA Nitin Murarka, we have over 17,000 premium members. It’s a platform where we provide complete transparency and share our trades and analysis with the members. The research team regularly posts calls and recommendations, guiding members on what to do throughout the day and which trades to consider. This level of performance evaluation is crucial as it allows members to assess the effectiveness of our trades and strategies. Transparency is essential, and we aim to provide accurate and timely information to help our members make informed decisions in the market.
As a student of the market, it’s essential to have complete clarity on performance. And we make sure to share our successes and learning experiences with the members to foster a community of traders and investors who can learn and grow together. Through continuous learning and improvement, we strive to help our members achieve their financial goals and build their skill set for successful trading and investing.
We provide various types of calls, including trading in calls, puts, and spreads. Our calls come with stop losses to manage risks effectively. The performance of our calls is transparently shared with the members on a weekly basis. We calculate the performance based on trading in one lot to provide a clear understanding of the potential returns.
For the current month of August, we have been running four weeks. In the first week, we made a profit of approximately Rs. 9,300, in the second week, Rs. 250, in the third week, Rs. 1,800, and the running profit for the fourth week is about Rs. 1,500. The total profit for the month is approximately Rs. 12,900.
To put this performance in context, the maximum deployed capital for trading was around Rs. 50,000. So, with a capital of Rs. 50,000, the potential return for the month of August is about 30%.
However, it’s important to note that while our performance has been positive, it is essential for traders to manage their risk and not to over-leverage themselves. We provide one trade per day, and it’s not necessary to take every trade. Traders should carefully analyze their risk appetite and choose trades that align with their trading strategy and goals.
In our premium index trading group, we provide a moderate number of trades, typically 3-4 trades per week, and sometimes even fewer if the market is volatile. We believe in quality over quantity, and it’s not necessary to trade every day. We only take trades that align with our analysis and provide favorable risk-reward opportunities.
As part of our commitment to transparency, we share a performance sheet with our members on a weekly basis. This sheet includes details of the trades, such as the trade type (naked option, spread, etc.), the strike price, entry and exit points, and the profit or loss incurred on each trade.
For the current month of August, we have been running for four weeks, and we share the performance of our trades for the entire month. We calculate the performance based on trading in one lot to provide a clear understanding of the potential returns.
It’s important to note that our trading strategy is based on probability, and while we strive for accuracy, no trading strategy can guarantee 100% success. There may be occasional losses, but overall, our goal is to achieve consistent and sustainable profits over the long term.
We also emphasize the importance of risk management and avoiding over-leveraging positions. Traders should carefully analyze their risk appetite and choose trades that align with their trading strategy and goals.
HeroZero is an interesting trading strategy that we use on every expiry day. It involves taking a trade in options after 1 pm and closing it out by 3:15 pm. The trade is based on a simple principle: take a small risk and aim for a target of three times the risk.
For example, if we take a call option at Rs. 17 with a stop loss at 0 and a target of 45, our risk is only Rs. 17. But if the trade goes in our favor, we can potentially make Rs. 45, which is three times our risk. This strategy allows us to manage our risk effectively and aim for a high reward-to-risk ratio.
Last week, we took a HeroZero trade in Nifty with a call option of Rs. 17, targeting a price of 45. The trade worked in our favor, and the price of the option reached Rs. 56. This means we achieved our target of three times the risk, resulting in a profitable trade.
The beauty of the HeroZero strategy is that even if we have losses in two out of four expiries, as long as we achieve our target of three times the risk in the other two, we can still end up with a profitable month.
This strategy allows us to take advantage of short-term opportunities and aim for consistent profits while managing our risk effectively. By sticking to our objective of achieving a 15-20% return on capital deployed per month, we avoid excessive risk-taking and focus on steady and sustainable growth.
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