MENTORING 4, DAY 7: 12 Nov 2021

Hello Team,

The entire week has been sell on rise market. If you see everyday there has
been a red candle(fig.1).

Consecutive red
candles

100 EMA

fig.1

We are now at an important support. 50 EMA and the low of the candle are
same and crucial. If it is broken then the next target will be at the 100 EMA.
If the market is closing and staying below 50 EMA then chances of reaching
to 37100 level also.

Let us start analysing the price action.

The next support of the weekly candle is the super trend.

If you see the momentum indicators both MACD and Stochastics are coming
down. In MACD, signal line is near zero. It has not gone below zero from the
month of May.
 Support- supertrend

fig.2

Daily candle formed Head and shoulder pattern and is also going down. Any
close below 38000 is not good for the bulls. If it has to be safe then Bank
Nifty has to close above 39200 – 39300. 20 EMA is also at 39300 level.

Head & Shoulder

fig. 3
Spot Chart

If you see the chart 38350 is the downside level to be watched and if it
breaks then then next level would be at 38150. Upside the levels are
38762,38950 and 39000.

Trading range we are looking for the day is 38750-38350.

fig. 4

Base

fig. 5

We marked 38150 as it made and rallied from the base. So when the
market comes to that level we might see some support.
OI Analysis
After yesterday’s expiry Bank Nifty moved around 400 points down and
good increase in put premium was also observed. In weekly expiry, Highest
Call and Put OI is on the same strike 38500. PE with 7L and CE with 7.5 lakh
contracts.

fig.6

So, for the current week expiry they are expecting a rangebound expiry
where they positioned themselves at 38500. The premium of 38500 Call
and Put are 469 and 318 respectively. They are going to pocket a huge
premium of Rs 787 if the market expires as they planned. They are
expecting a range of 780 points up and down from 38500.

Today being Friday, there might be premium erosion in second half as some
people unwind their position, they won’t be carrying position for the
weekend. If someone does, we could see it in data. We will see who is
stronger today the 38500 Call or Put writers. Next resistance is at 39000
with 7.4 lakh contracts where as PE strike have only significant build up at
38000 with around 4 lakhs OI.
Monthly expiry, 39000 is having the highest Call OI and we could see Put OI
getting unwinded yesterday. If the market goes beyond 39000, we have to
see 39000 Call writers are unwinding or if they are adding up the position.

Now as per data, the range of the month is 38000 to 39000 and we are at
38500.

fig.7

If there is some price action happening then we will check out how the data
is shaping up for a better confirmation.

9:08

Pre open has settled at 38707 and it is up by 0.38%. Our first level of
resistance is 38750 and we have previous day high also as the resistance.

Though it is opening gap up we might see one round of sell off happening.

Global markets are positive. Let us see how our market is reacting.
Trades and Logic
1) Took a PE trade expecting follow up after the red candle. On spot it was
showing that it is taking resistance at our level(fig.10). Expected the candle
might give a rejection and go down but it took our Stop loss.

entry

fig. 9

fig. 8

exit

fig. 9
 Rejection

fig. 10

2) Again, we took a PE trade when the candle gave rejection from the
Previous day high(fig.10). Market was also making a double top.

We got the confirmation that double top was made.

If you see the candle also closed below VWAP. But it was not giving the
momentum that we expected.

We booked the stop loss.

Double top

fig. 11
 entry

fig. 12

exit

Candle closed below

fig. 13
Observation: Most of the time, what I have observed is whenever a candle
like the first candle of the day (big green candle) is formed there are
probability of market touching its low. It is just a probability and not
certainty.

3) Took a PE trade. It was showing a bearish set up MACD was going below
zero. Break of the level (fig.14) would be a perfect entry. A good red candle
would help us to get the target.

level

fig. 14

It was showing a proper bearish set up. The market was making Lower
highs. We only need the right follow up now. We got the candle as expected
but to be safe we exited some quantities before the move to be safe as it
was not giving the momentum as expected.
 Lower high

Day low

fig. 15

entry

fig. 16

exit

fig. 17
Observation: We could see that from past couple of days after every red
candle we could see an immediate reversal. It is all about the behaviour of
price. We were trapped yesterday but we were able to learn from it.

Quick reversals after big red

fig. 18

Why we did not go for a CE trade in morning. First of all, we know there is a
level which we had marked and if you observe the market, it is in a
downtrend and we could see market moving lower from the day’s open.

Down trend market, Lower

fig. 19
We could see that a base was formed yesterday and today the buyers tried
to protect it, 38483. So, if that level is broken, we can see some down move
happening. If you observe, 38600 they formed a base and it was broken
with full body red candle. So, when market comes to this level, we might
see a small resistance.

Broke the base with full

Base which is being protected

fig. 20

4) We could see a selling pressure from VWAP. Two candles formed an

15-minute candle

fig. 21
We booked the stop loss even as there was no momentum as expected.

Rejection

fig. 22

5) The red candle turned to green candle and was trying to break the high
of the base. Even though we saw a buying pressure at the low of the candle
there was no momentum.

Red candle

fig. 23
 Green candle

fig. 24

exit

fig. 25

We booked our Stop loss as the follow up candle was not convincing.
6) This is one of our favourite set ups, a full body candle closing above 200
EMA. But today’s market is very tricky. There was no convincing follow up
candle the second candle after crossing 200 EMA will give a good follow up.

Full body candle

200 EMA

fig. 26

Exit

fig. 27
7) Once again it gave the similar set up a green candle closed above the 200
EMA for the second time. But as it was a tricky day we were not getting a
good follow up.

Close above 200 EMA

fig. 28

We could see wicks were formed at 200 EMA showing weakness and then
the candle closed above 200 EMA still there was no following.

Exit

fig. 29
It was a tricky day indeed. Even though we had good confirmations we had
to book our Stop loss. Market works like this. We have to follow our set up
and trust them. Because every day it won’t be the same.

Like profits we also have to accept the losses and have to learn what went
wrong. Though we have observed what was the price behaviour panning
out from last couple of days and even we took the trade as per our set up
we had to book loss for the day.

Losses are also the part of the game. Today we are closing the day in red
with RS 164462. However, we have booked around 6 Lakhs this week
including today.

Hope you enjoyed the session. Thank you.

Momentum Mentoring 4

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