End of Day Analysis 03.08.2018 – Nifty, Bank Nifty and Stocks

Markets are back with a bang!

Nifty was skating on thin ice. It stood exactly where the support was yesterday.

If there were any correction today, it would have led to a lot of selloff.

But no correction, no weakness; only strength and powerful surge.

Here’re the highlights of the day’s trade:

  • Global markets have shrugged off the fear of trade war for the moment. US markets were mixed at the most but not down and out. Asian markets were more or less alright. So Nifty had the license to surge upwards!
  • Nifty opened gap up which indicated its strength and direction. There was no way Nifty was going to come down from there.
  • Since yesterday’s close of 11244, it was only one step away from a slide. It took support from where the support lay and recovered today to close next to the previous high which is also the new all time high of 11360.
  • There was an intraday high earlier of 11390 but on a closing basis we have not seen anything above 11360 as yet.
  • If all goes well on Monday, we will see 11400 print on Nifty. However, there’s still some time left over weekend to mull over trade war that Trump has sought to escalate.
  • Bank Nifty also made a stellar recovery. Since its yesterday’s close of 27355, it was threatening to go down heavily. But it has made a grand comeback from there to close next to 27700.
  • This recovery is special when you consider that HDFC Bank was down for the day. Mind you, HDFC has 36% weightage in Bank Nifty.
  • Rest of the banking stocks made a commendable comeback today.

So here we stand again in this familiar territory of all time high in Nifty and Bank Nifty.

Where do we go from here?

Here’re the ideas worth exploring:

  • Nifty and Bank Nifty can give another breakout without any rhyme or reason above their all time highs. You should not try to short them because they are at their all time highs.
  • However, it’s a good idea to be on the lookout for weakness and see the opportunity on the downside. If it breaks the levels of support around 11200 or 27400 again, there’s a good chance, it will correct significantly from here.
  • If that happens, you should sell calls with proper hedge and hold it till the trend lasts.
  • In the meantime, you have to play the waiting game. On the upside, there is very little space left in spite of the momentum that Nifty has generated.
  • If you open long positions from here, you are playing it for low profit and high risk. So stay away from such low probability trades.

So markets have had a good day. Let’s cherish it but don’t get carried away. RBI has raised interest rates. FED will continue to do so. Bank of England has raised interest rates.  Trade war is about to escalate to the next level. These are telling signs of conflicts ahead. So stay safe and stay alert. If you survive in the market, you will surely make money!