NIFTY Nov Second Week

8 нояб. 2020 г.

I was absolutely incorrect last week. I thought the market would decline. It didn't. I thought the market would be very volatile. It wasn't. The mistake last week was prematurely calling the end of the july-started rally (and the end of the powerful third wave of the mid-June started rally). Turns out that the wave 5 of the july-started rally had more juice left. It was extending. I guess, as they say about markets, you are always just one trade away from humility. Thankfully, the advice was to buy a put option. So, the losses got limited to barely Rs. 300-Rs. 400, i.e. the option price. I will try a few more weeks of options. I will learn how much of the delta (of option greeks) goes against us and accordingly decide if options should always be used to buy/short futures. Only buying options. No writing options. Ever.

Long Term: In the long term, winter is coming. The market would correct. It has been a hell of a rally post the covid lockdown in March. It has to correct. The correction has to be significant. The market has moved around 4,500 points in that period. It has to correct in that proportion.

Medium Term: Once the extending wave 5 (of the July started rally) ends, the market should correct. From July, the market has rallied around 2,000 points. So the correction should be of that order.

Short Term: No one really knows where an extending wave ends. To me the next important level seems to be 12,341. Then 12,622. Then 13,075. We should be trying to set up shorting levels at those points.

How would I trade this: Buy put options with the strike prices of 12,341 and 12,622 and 13,075. Fingers crossed.

As always. I could be right. I could be wrong. I am always learning. Trade at your own risk.