Market Trade Setup 26th December

Very bad Christmas for the market and we are starting the boxing day with a lot of bad punches delivered by bears. On Monday night Dow Jones closed 653 points down and now all the 3 indices in the US, Dow, S&P and NASDAQ are in bear territory losing more than 20%. Not only that Japan, China, Germany also have entered into the bear territory by losing more than 20% in a calendar year. The CBOE volatility which was at 19% a month ago is at 36% now which is almost 100% up. All indicators are pointing at a fear that there is no growth and that is leading to a big collapse in the market. India on, the other hand fell almost 10% when all these advanced economies fell by more than 20%. 

Coming to domestics, the biggest positive for us is the Brent Crude. Brent is trading at 50 dollars per barrel and nobody can believe that it was 86 dollars just 2 months ago. From there Crude almost fell 40% and how much it will help the markets when other things are so bearish needs to be seen. It will surely help our current account but for today and tomorrow the expiry factors will play out and on Monday we slipped through the 20 and 200dma and closed below that. That means we now have the 50dma at 10580 levels and 200dma at 10760 then I can see Nifty moving in between these two values for the expiry.

On the derivatives front, there was not much selling in the Nifty Futures even though Monday corrected 90 points on Nifty. The overall long positions on Nifty futures still remain at 47% and there was not much change in the Nifty put-call ratio also where it dropped to 1.26 from 1.28. This was mainly due to very low volumes we have seen on Monday as we were trading right in between two holidays and Christmas season. The options chart looks messy and 10000 put and 11000 call stil have the highest open interest. But it is now more or less meaningless and we will look at 10550 and 10750 as the markers for expiry. That makes 10500 put and 10800 call more important and you need to see the open interests there. 

What is the Nifty call for the day?

Slow down fears vs Crude positive is what we have to look at and today we might open a bit gap down again at around 10650 levels and what happens from there needs to be seen. 50dma is at 10580 and that might offer support. On the upside 10720 which is 20dma is resistance now. For me, taking a naked call on sell side could be a strategy now. 10700 or 10650 or 10600 could be your choice, whichever is suitable at the moment when you are taking that call.